08 BFC Georgia Agriculture Finance Bulletin

04/2013

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8 Geo r g i a Agriculture Finance Bulletin 57 Million GEL has been allotted for procurement of farming machinery Government Encourages Agro-insurance Great Britain is ready to assist Georgia in developing agriculture Kazakhstan Determined to Reclaim Business in Georgia

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Georgian Agriculture Finance Bulletin Issue #8, April 16—30, 2013

Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) 13) 14) 15) 16)

Head of Adjara Government participated in Odessa Investment Forum........................................ 2 Tax Advantages to be Imposed in Agriculture Sector ..................................................................... 2 Countrywide Rehabilitation of Melioration Systems is Underway ................................................. 2 More than 3 million GEL issued in the frameworks of the Preferential Agricultural Credit Program ......................................................................................................................................................... 3 Georgia and Belarus discuss cooperation in the fields of agriculture and energy .......................... 3 Land consolidation is one of the most urgent problems................................................................. 3 Ministry of agriculture expects 20—25% growth of wine export after the opening of the Russian market ............................................................................................................................................. 4 57 Million GEL has been allotted for procurement of farming machinery ..................................... 4 Agriculture Minister: Irrigated area will be increased twice ........................................................... 4 Draft Bill: A foreigner will be unable to acquire land area of more than 2.5 hectares in Georgia.. 5 Mass production of plows could start in Georgia ........................................................................... 5 Government Encourages Agro-insurance........................................................................................ 5 Bidzina Ivanishvili Opened Georgia—Ukraine Business Forum....................................................... 5 Tbilisi Hosts Georgia—China Business Forum ................................................................................. 6 Rezonansi: Area of Cultivated Agricultural Land Has Doubled........................................................ 6 Agriculture Minister Takes Political Responsibility and Resigns ..................................................... 6

Foreign Aid ................................................................................................................. 6 17) Great Britain is ready to assist Georgia in developing agriculture .................................................. 6

Private Sector.............................................................................................................. 7 18) 19) 20) 21) 22) 23) 24)

Kazakhstan Determined to Reclaim Business in Georgia ................................................................ 7 “Alaverdi” Plans to Sell Wine in Russian Restaurants, Markets and Shops .................................... 7 “Sale Management Company” is ready to help inexperienced farmers ......................................... 7 “Commerzbank” Expressed Interest in Georgian Agriculture ......................................................... 7 “Aldagi BCI” and “GPI Holding” Predict an Increase in Demand for Agro-insurance ...................... 8 40 Million bottles of Georgian wine will be exported in an year .................................................... 8 Lending volume of commercial banks increased by 0.9% ............................................................... 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

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info@bfconsulting.com www.bfconsulting.com

BFC. Georgian Agriculture Finance Bulletin. Issue #8, April 16—30, 2013

State Initiatives 1)

Head of Adjara Government participated in Odessa Investment Forum th

April 15 , 2013, http://bizzone.info/agriculture/2013/1366053443.php

In Odessa, the International Investment Forum “Odessa FDI forum of 2013. Focus infrastructure” was held. Negotiations between the delegation of the Government of the Autonomous Republic of Adjara, led by Prime Minister Archil Habadze, and president of the “shipping company Ukrferry” Alexander Kurland.

This year Ajarian farmers plan to harvest a large ammount of mandarins, approximately 80,000 tons, of which over 50,000 are going to be delivered to Ukraine. These plans according to the Government of Adjara may not be fully realized, only for one reason—the presence of artificially created bureaucratic obstacles from the Ukrainian side.

Last fall, Ajarian gardeners faced this problem when the previous agreement on customs clearance of citrus from Georgia was only partially fulfilled and products encountered additional requirements. As a result, the Georgian tangerines hit the Ukrainian market way too late. And the place of Adjarian relatively cheap and high quality products was taken by Turkish and Egyptian competitors. Read More »

2)

Tax Advantages to be Imposed in Agriculture Sector th

April 17 , 2013, http://commersant.ge/eng/index.php?id=5166

The government plans to impose tax concessions for agricultural sector. According to the first Deputy Minister of Finance, a project will be worked out in the frames of which agricultural entrepreneurs with turnover of more than 200 thousand GEL will be exempt from income and profit taxes. However, David Ebralidze notes that the margin is not yet finally approved and a work on this issue is underway.

According to him, agricultural products will be exempted from value added tax [VAT] with set-off right.

Ministry of Finance presented this issue to the Business Association in the form of presentation and, as the Ministry says, the changes will be sent for approval to Parliament only after consultations with the business.

3)

Countrywide Rehabilitation of Melioration Systems is Underway th

April 18 , 2013, http://www.sarke.com/cgi/search/news.asp?Code=10037686

Georgian Ministry of Agriculture reported that rehabilitation of 30 melioration facilities is underway countrywide, while cleaning of 25 channels is already completed. Rehabilitation is conducted by Georgian United Melioration Systems’ Company.

According to the Ministry’s data of February, 61.4 million GEL was allotted for this company, of which 53.3 million GEL is intended for melioration systems’ rehabilitation and procurement of melioration technologies.

Vazha Kirtava, director of the company, visited Kakheti region today, in order to be acquainted with the rehabilitation course on the spot. He declared that the water deficit is the main hampering factor for crops productivity in Eastern Georgia, noting that “Works of such scale will solve the problem, significantly assisting the growth of crops yield for the next year.”

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BFC. Georgian Agriculture Finance Bulletin. Issue #8, April 16—30, 2013

4)

More than 3 million GEL issued in the frameworks of the Preferential Agricultural Credit Program th

April 19 , 2013, http://bizzone.info/agriculture/2013/1366398486.php

As stated by the representative of the agriculture development fund, banks on average receive about 1,000 applications per day, and at this stage, problems don’t occur.

According to data for April 16th, in the first category (loans up to 5,000 GEL) 167 loans were issued for GEL 94,000. In the second category (loans from 5,000 to 100,000 GEL), 55 farmers have been granted loans for a total of 1,155,000 GEL, and in the third category (7 year loans up to 1 million GEL), three entrepreneurs have received loans totalling 1,294,000 GEL. Read More »

5)

Georgia and Belarus discuss cooperation in the fields of agriculture and energy th

April 19 , 2013, http://www.sarke.com/cgi/search/news.asp?Code=10037697

According to the Ministry of Economy and Sustainable Development of Georgia, in June, a meeting of the Georgia-Belarus Intergovernmental Commission is going to be held. The meeting will cover a wide range of bilateral issues, including the possibility of deepening the cooperation in the fields of energy, agriculture, trade and investments.

The announcement was made today at the Ministry of Economy during a meeting with a government delegation of Belarus.

As noted, the Belarusian side is interested in joint ventures and supply of agricultural products and agricultural equipment. During the visit, the delegation got acquainted with the regional centers of mechanization.

According to preliminary data Geostat (Geostat), in 2012, investment in Belarus, Georgia totaled USD 15,000, and in 2011—USD 151,800.

With regard to trade relations between the two countries, the Georgian exports to Belarus in 2012 amounted to USD 33.46 million (1% of Georgia’s exports) and imports from Belarus—USD 34.52 million (0.04% of total imports).

6)

Land consolidation is one of the most urgent problems nd

April 22 , 2013, http://bizzone.info/agriculture/2013/1366670659.php

Land consolidation is one of the most urgent problems.

At a press conference, Minister of Agriculture David Kirvalidze said: “Georgia has more than three and a half million plots of land with an area of less than one hectare. This makes our job a lot harder.”

“On the one hand, there is a problem of commercial production, and on the other the environmental problem, because in such small areas, it is very difficult to introduce various seeds. One can not always

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BFC. Georgian Agriculture Finance Bulletin. Issue #8, April 16—30, 2013

put the same culture at the same place. Therefore, the need to replace the crops appears. Based on the fact that doing this in small areas is difficult, consolidation is necessary”. Read More »

7)

Ministry of agriculture expects 20—25% growth of wine export after the opening of the Russian market nd

April 22 , 2013, http://sarke.com/cgi/search/news.asp?Code=9037995

According to the Minister of Agriculture of Georgia David Kirvalidze, after the opening of the Russian market wine export is expected to increase by 20—25%, which will add up to 10.7 million bottles.

Agreement has already been reached and negotiations are under way on technical regulations, which will be ending soon, the minister said at a press conference. At present, of the 65 wineries 7—have registered their own products in Russia, he said.

For reference, now in the top five export markets for Georgian wine include Ukraine, Kazakhstan, Belarus, China, Poland, and 47% occur in the first country.

8)

57 Million GEL has been allotted for procurement of farming machinery nd

April 22 , 2013, http://sarke.com/cgi/search/news.asp?Code=10037714

Georgian Agriculture Ministry reported that 57 million GEL is allotted by Georgian Fund for Rural and Agricultural Development for procurement of farming machinery. The matter concerns 350 units of heavy machinery and 1,700 units of minor mechanical devices.

According to LLC Mechanizator, half of purchased tractors are already delivered, while remaining machinery will be delivered by the end of May. The machinery is purchased in Italy, Germany and Czech Republic.

Besides, within program of melioration systems’ rehabilitation, the Ministry and United Melioration Systems Company have procured melioration technologies of USD 3.6 million.

9)

Agriculture Minister: Irrigated area will be increased twice nd

April 22 , 2013, http://sarke.com/cgi/search/news.asp?Code=10037715

Agriculture Minister David Kirvalidze declared that the area of irrigated agricultural lands will increase twice countrywide.

As he said at today’s press conference, United Melioration Systems Company has started repairing 72 objects by its own resources. Works on more 10 objects will start by the end of April.

Currently, works are underway in Akhmeta, Telavi, Kareli, Gori, Kaspi, Mtskheta and Bolnisi districts, while Gardabani and Marneuli municipalities are ready for the irrigation season.

Kirvalidze also declared that cleaning of drainage systems was started and it will grow in size from May of this year.

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BFC. Georgian Agriculture Finance Bulletin. Issue #8, April 16—30, 2013

10) Draft Bill: A foreigner will be unable to acquire land area of more than 2.5 hectares in Georgia rd

April 23 , 2013, http://sarke.com/cgi/search/news.asp?Code=10037719

The experts have drafted amendments to the bill “On Agricultural Land Ownership”, which imposes restrictions on land purchase by foreigners. Authors of the bill are a doctor of economics Paata Koguashvili and a doctor of law Zaur Jinjolava.

Namely, the draft restricts foreigners to acquire agricultural land sites with total area over 2.5 ha. Only 5% of agriculture lands might be in ownership of foreigners.

In case of a legal person, the land can be purchased only if Georgian citizen is a holder of at least 51% of the company.

A foreigner, who wants to acquire agricultural land site in Georgia, has to have lived in the country for the last 10 years and agricultural education.

11) Mass production of plows could start in Georgia th

April 24 , 2013, http://bizzone.info/agriculture/2013/1366841884.php

The Minister of Agriculture of Georgia, David Kirvalidze and CEO of SRL “Mechanization” Vaja Nakhutsrishvili visited the Samtredia service center.

The Minister met with Speaker of the Institute of Mechanization and Electrification Makharoblidze Zaza, who presented an experimental plow produced in Georgia. This plow has already been used in tillage.

Read More »

12) Government Encourages Agro-insurance th

April 24 , 2013, http://commersant.ge/eng/index.php?id=5247

The Agriculture Ministry has started working on agro-insurance schemes. According to the Deputy Minister of Agriculture, agro-insurance is a complex product. However, the ministry is holding consultations on development of insurance schemes both with Georgian and foreign insurance companies.

Shalva Pipia says that due to the complexity of the product, a preliminary forecast of when agroinsurance project will be formed, is unknown at this stage. Read More »

13) Bidzina Ivanishvili Opened Georgia—Ukraine Business Forum th

April 26 , 2013, http://commersant.ge/eng/index.php?id=5273

Georgia-Ukraine Business Forum is being held at “Tbilisi Marriot” hotel. The forum was opened by the Prime Minister Bidzina Ivanishvili. Apart from the representatives of economic and business sector of Ukraine, the Senior Officials of the economic team of the government of Georgia attend the forum.

As Director of the Georgian Investment Agency Giorgi Pertaia told journalists before the forum, about 50 representatives of Ukraine’s leading companies participate in the forum. They are interested in the field of agriculture, transportation, IT and logistics. Read More » Page 5

BFC. Georgian Agriculture Finance Bulletin. Issue #8, April 16—30, 2013

14) Tbilisi Hosts Georgia—China Business Forum th

April 28 , 2013, http://commersant.ge/eng/index.php?id=5229

Today, Georgia—China Business Forum will be held in Tbilisi. According to the National Investment Agency, the event will be attended by representatives of up to 40 Chinese companies who are studying Georgia’s investment environment and business opportunities.

The Chinese delegation members represent such sectors as energy, real estate and agriculture. Forum is organized by the Chinese Embassy in Georgia, Georgian National Investment Agency and Partnership Fund

15) Rezonansi: Area of Cultivated Agricultural Land Has Doubled st

May 1 , 2013, http://www.sarke.com/cgi/search/news.asp?Code=10037794

According to target data of Georgian Ministry of Agriculture, land area totaling to 400,000 ha has been cultivated in this year.

Kote Khutsaidze, head of the Ministry’s department, says that the area of cultivated land has been increased by 50%, being “supported by agricultural development program”.

Overall, there is possibility to cultivate land area of 740,000 ha in Georgia, but the situation in this respect worsened from 2005, the article notes.

16) Agriculture Minister Takes Political Responsibility and Resigns nd

May 2 , 2013, http://commersant.ge/eng/?id=5323

The case is related to violations of the law with regard to agricultural vouchers.

Agriculture Minister David Kirvalidze, as he himself says, is temporarily leaving his position. As commersant.ge correspondent reports from the State Chancellery, the Ministry announced this a few minutes ago in connection with the scandal surrounding rural cards. Read More »

Foreign Aid 17) Great Britain is ready to assist Georgia in developing agriculture th

April 25 , 2013, http://bizzone.info/agriculture/2013/1366909387.php

The Minister of Agriculture of Georgia, David Kirvalidze met with British Ambassador David Moran and briefed him on the situation in the agricultural sector.

The Ambassador inquired the priorities of the Georgian government, concerning the agricultural sector.

“UK is interested in intensification of trade relations with Georgia. To date, the main export from Georgia to the UK is wine and mineral water. Although, given the new circumstances interest in Georgian

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BFC. Georgian Agriculture Finance Bulletin. Issue #8, April 16—30, 2013

products increased in the trade circles of Great Britain. We offer you a more active cooperation in this direction” - David Moran noted. Read More »

Private Sector 18) Kazakhstan Determined to Reclaim Business in Georgia th

April 15 , 2013, http://finchannel.com/Main_News/Geo/126334_Kazakhstan_Determined_to_Reclaim_Business_in_Georgia/

Baku-Tbilisi-Kars, New Silk Road and Kashagan Field are huge economic projects linking Georgia and Kazakhstan and promising great benefits to both countries.

Energy, tourism, agriculture, infrastructure and financial services are various sectors named by Adil Tursunov, Charge d’Affaires of Kazakhstan to Georgia that could prove attractive to Kazakh investors in Georgia. Read More »

19) “Alaverdi” Plans to Sell Wine in Russian Restaurants, Markets and Shops th

April 17 , 2013, http://commersant.ge/eng/index.php?id=5162

The company “Alaverdi” does not intend to enter only one segment in Russia and plans to conquer various markets.

As сommersant.ge was told by the company’s representative, they would sell “Alaverdi " wine in restaurant chains, as well as in the shops and markets. However, the selling price of wine is not known.

Read More »

20) “Sale Management Company” is ready to help inexperienced farmers th

April 18 , 2013, http://bizzone.info/agriculture/2013/1366340292.php

Company is ready to consult farmers who want to apply for agricultural credit, about planning business and financial managment.

New initiative is designed for inexperienced farmers and businesses that want to get agrocredit and face certain difficulties with the banks. Services include planning strategy, advertising and marketing, brand building and market positioning.

Management of the company noted that services are available, as 50—70% of services will be financed by one of the programs of EBRD. “Sales Management Companies” claims that the agricultural sector suffers from a lack of capital, and this source of funding will give many businesses the opportunity to rearm and introduce new technologies. Read More »

21) “Commerzbank” Expressed Interest in Georgian Agriculture rd

April 23 , 2013, http://commersant.ge/eng/index.php?id=5233

“Commerzbank” supports the government’s economic initiatives.

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BFC. Georgian Agriculture Finance Bulletin. Issue #8, April 16—30, 2013

The Bank’s Supervisory Board Chairman Martin Blessing said after the meeting at the Ministry of Economy and Sustainable Development today.

A delegation of Germany’s second-largest bank was received by the First Deputy Minister of Economy and Sustainable Development of Georgia Dimitri Kumsishvili. The meeting was also attended by the German bank’s two partners which are working in the agricultural sector. Read More »

22) “Aldagi BCI” and “GPI Holding” Predict an Increase in Demand for Agro-insurance rd

April 23 , 2013, http://commersant.ge/eng/index.php?id=5238

The insurance company “Aldagi BCI” expects an increase in demand for agro- insurance in the backdrop of intensified agro-lending.

As “Aldagi BCI” explains, intensified agricultural lending will develop agriculture, including agro— insurance. However, the company has no plans to introduce a new product to the market, because they say that the current product offered by “Aldagi” is flexible and fits the market well. More than 1,000 farmers of Kakheti region have been insured by the company. Read More »

23) 40 Million bottles of Georgian wine will be exported in an year th

April 26 , 2013, http://sarke.com/cgi/search/news.asp?Code=10037756

National wine agency reports that in the first quarter wine was exported to 26 countries. The following countries compose the top five export markets: Ukraine (47%), Kazakhstan, Belarus, China and Poland.

Wine export is increased by 21%, if compared with the same period of 2012, the article says. Wine accounts for 2.4% of total Georgian export (the 9th position).

As for Russian market influence, the Agency forecasts that export of 8—10 million bottles will be possible during the first year. Envisaging this showing and growth pace, “our wine export might reach 40 million bottles in a year”, the Agency declares.

24) Lending volume of commercial banks increased by 0.9% th

April 26 , 2013, http://www.prime-news.ge/?p=105368&lang=en

The volume of lending by commercial banks (including loans to non-residents) in March, 2013, increased by 74.0 million GEL (0.9 percent) compared to the previous month and exceeded 8.7 billion GEL by April 1, 2013, the National Bank of Georgia informs.

The volume of loans provided in the national currency increased by 84.7 million GEL (3.0 percent) and the volume of loans in a foreign currency decreased by 10.7 million GEL (0.2 percent). 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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