12 BFC Georgia Agriculture Finance Bulletin

08/2013

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12 Ge o r g i a Agriculture Finance Bulletin Ministry of Agriculture creates a new structure to work with cooperatives Who invests in Georgia?

Reduction of citrus prices is expected in Russia after the Georgian product re-enters the market Georgian hazelnuts gets a better position on the world market

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Georgian Agriculture Finance Bulletin Issue #12, August 1—31

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

Wineries account for most loans issued within the third component of the preferential Agrolending project ......................................................................................................................... 2 Ministry of Agriculture creates a new structure to work with cooperatives .................................. 2 “Rosselkhoznadzor” Representatives Expected to arrive in Georgia on August 15........................ 2 Rezonansi: “Georgian fruits and vegetables will enter Russia within 2 weeks” ............................. 3 Rezonansi: “vintage-2013—new system and high prices” .............................................................. 3 50 million gel to be issued in the Framework of the Fifth component of agricultural loans .......... 3 12 new citrus packing and sorting ventures will be opened in Adjara............................................ 4

Foreign Aid ................................................................................................................. 4 8) 9)

USAID and Mashav cooperate to develop greenhouse vegetable production in Samegrelo-Zemo Svaneti ............................................................................................................................................. 4 Who invests in Georgia? .................................................................................................................. 4

Private Sector.............................................................................................................. 5 10) 11) 12) 13) 14) 15) 16) 17) 18) 19) 20)

Rezonansi: Hazelnut harvest is expected to be 30% more than it was the previous season ......... 5 Georgian export to Azerbaijan increased, while import from this country decreased ................... 5 Tbilisi accounts for 76% of issued loans .......................................................................................... 5 Georgian olives will be exported ..................................................................................................... 6 Profit of micro-financial organizations increased 2 times in q2 ...................................................... 6 In January—June cattle export to Azerbaijan increased by 60% .................................................... 6 Reduction of citrus prices is expected in Russia after the Georgian product re-enters the market7 Russia rejected 19 varieties of Georgian wine ................................................................................ 7 “Tbilvino” sees no need to subsidize vintage .................................................................................. 7 Kviris Palitra: “winemakers expect production growth” ................................................................. 7 Georgian hazelnuts gets a better position on the world market .................................................... 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

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BFC. Georgian Agriculture Finance Bulletin. Issue #12, August 1—31

State Initiatives 1) Wineries account for most loans issued within the third component of the preferential Agrolending project August 1st, 2013, http://sarke.com/cgi/search/news.asp?Code=10038658

The Agriculture Project Management Agency reported that loans of USD 16 million have been issued within the third component of the preferential agrolending project (funding of agricultural enterprises).

Of that amount, wineries account for approximately 33% (USD 5.2 million).

Cattle breeding accounts for 21% (USD 3.24 million), processing—14% (USD 2.2 million), warehousing (cold storage, dryer, storehouse)—up to 11% (USD 1.7 million), greenhouses—up to 7% (USD 1 million).

The remaining areas (plant growing, fish farming, poultry farming, dairy farming, etc.) accounted for 15% in total (USD 2.3 million).

According to the Agency, 125 loans have been issued, while 22 loan applications are under consideration.

2) Ministry of Agriculture creates a new structure to work with cooperatives August 9th, 2013, http://bizzone.info/agriculture/2013/1376100128.php

The Ministry of Agriculture is adopting a new structure in order to work with cooperatives. The Ministry noted that this is going to help in solving many problems farming communities face.

The Parliament of Georgia has approved the Law Concerning Agricultural Cooperative prepared by the Agriculture Ministry of Georgia and the parliamentary agrarian committee. The law will be active from October of this year.

Alongside with putting in effect of the Law, the Agriculture Ministry establishes a legal entity of public law Agency for Agricultural Cooperatives. The new structure will ensure proper and effective cooperation within the communities and household economies Read More »

3) “Rosselkhoznadzor” Representatives Expected to arrive in Georgia on August 15 August 13th, 2013, http://commersant.ge/eng/index.php?page=news&id=1228

“Commersant” radio reports that a 6-member commission of the Russian Federal Service for Veterinary and Phytosanitary Surveillance (VPSS) (Rosselkhoznadzor) will arrive in Georgia on August 15. The National Food Agency informs that a visit will last until August 21 and is aimed at Russian recognition of certificates issued by the Georgian side to agricultural products.

According to the agency, the Commission will examine the labs located both in the eastern and western Georgia and an emphasis will be made on certificates issued for high-risk products. Read More »

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BFC. Georgian Agriculture Finance Bulletin. Issue #12, August 1—31

4) Rezonansi: “Georgian fruits and vegetables will enter Russia within 2 weeks” August 14th, 2013, http://sarke.com/cgi/search/news.asp?Code=10038770

The Georgian Agriculture Ministry reports that a delegation from the Russian Ministry of Agriculture will visit Georgia on August 15. During this one-time 6-day visit, Russian experts will inspect Georgian produce, especially citrus.

Georgian vegetables and fruits will be sent to Russia within a few days after the specialists’ conclusions are made. This could happen by the end of August.

As Avtandil Meskhidze, Deputy Minister of Agriculture of Ajara notes, the Russian market always was the main market for Georgian tea and citruses. Removal of embargo will provide big stimulus for further development of this sector.

Despite efforts to search for new markets, the potential for citrus still has not been realized, Meskhidze declared. In past years, Georgian citrus was mainly exported to Ukraine and Belorussia.

5) Rezonansi: “vintage-2013—new system and high prices” August 15th, 2013, http://sarke.com/cgi/search/news.asp?Code=10038784

Shalva Pipia, Georgian Minister of Agriculture, declares that “Vintage-2013 will result in more competitive farmers and more modern production.”

In 2012, the state purchased about 63% of the total harvest, which meant that the private sector got much less than in previous periods, the Minister says, adding: “we will change rules of the game”.

As it is announced, “the state will not rival private companies this year” and will implement subsidy program, without vouchers however. The grape harvest is expected to reach 150,000 tons this season, while up to 80 enterprises will purchase grape from farmers. According to the Minister, a database will be created this year, which will include all transactions of wine companies in order to “make an census and to be able to draw exact plans for 2014”.

6) 50 million gel to be issued in the Framework of the Fifth component of agricultural loans August 16th, 2013, http://commersant.ge/eng/?page=news&id=1255

A total of 50 million GEL will be issued in the framework of the fifth component, although, as Agricultural Projects Management Agency says, the credit portfolio can be increased if necessary.

Note: Upon the initiative of Minister of Agriculture, a fifth component was added to the preferential agro credits project, in the framework of which 15-month loans will be issued to wine companies and the subsidy budget will reach 25 million GEL. Loans will be issued by “Bank of Georgia”, “TBC Bank”, “CARTU”, “VTB Bank”, “BasisBank” and “ProCredit Bank”. The application was sent to all banks, but only six expressed willingness to participate.

These banks have already had the experience of working with wine companies—the fund states.

Read More »

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BFC. Georgian Agriculture Finance Bulletin. Issue #12, August 1—31

7) 12 new citrus packing and sorting ventures will be opened in Adjara August 22nd, 2013, http://en.bpi.ge/index.php?option=com_content&view=article&id=14696:12-new-citrus-packing-andsorting-ventures-will-be-opened-in-adjara&catid=49:2011-11-06-16-56-03

With support of Adjara government, 12 citrus packing and sorting and agricultural products packing ventures will be opened in Kobuleti and Khelvachauri municipalities.

Investors who wish to establish enterprises are already revealed; they will receive land for symbolic prices to establish ventures. The territory owner is required to maintain enterprise profile for 20 years and employ local population. Read More »

Foreign Aid 8) USAID and Mashav cooperate to develop greenhouse vegetable production in Samegrelo-Zemo Svaneti August 21st, 2013, http://www.georgianeo.ge/failebi/Press_Release_NEO_MASHAV_ENG_22744.pdf

Today marks the conclusion of a MASHAV (Israel’s Agency for International Development Cooperation) led initiative to support the development of the USAID/NEO greenhouse vegetable value chain. Over the past week, two MASHAV experts conducted an intensive and custom-designed course on modern techniques of greenhouse vegetable production, and post-harvest handling and packaging of vegetables in accordance with international standards.

In the Zugdidi and Tsalenjikha municipalities, USAID/NEO has supported the estabishment of 11 fruit and vegetable greenhouses, 10 open-field strawberry demonstration farms, 1 strawberry and cane berry nursery, 9 beekeeping demonstration farms and 83 test plots for hazelnut integrated pest management.

In the coming year, NEO will support the development of a livestock feed mill and an agricultural resource center, which will provide the inputs and technical assistance needed to promote the further development of the agricultural sector in Samegrelo-Zemo Svaneti. Read More »

9) Who invests in Georgia?

August 21st, 2013, http://finchannel.com/Main_News/Geo/128432_Who_Invests_in_Georgia?/

There are 34 individuals registered as presidential candidates at the Central Election Commission.

George Margvelashvili from the ruling party Georgian Dream and David Bakradze from National Movement are the main candidates representing the most influential political groups. It's expected that former Parliamentary Speaker Nino Burjanadze will ballot as well.

National Movement, which ruled the country from 2003-2012, is actively backed by the U.S. because of its strict pro-western orientation and anti-Russian policy, while Georgian Dream and the party of Nino Burjanadze are mainly more oriented on improving relations with Russia. This makes experts think that a Margvelashvili or Burjanadze victory will likely fast be followed by investments from Russia. Read More »

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BFC. Georgian Agriculture Finance Bulletin. Issue #12, August 1—31

Private Sector 10) Rezonansi: Hazelnut harvest is expected to be 30% more than it was the previous season August 2nd, 2013, http://sarke.com/cgi/search/news.asp?Code=10038664

Begi Sioridze, head of the Hazelnut Exporting Company, expects that hazelnut harvest in Georgia will exceed last year’s results by 20—30% (the volume is not noted). The company has been operating on the market for 7 years and exports hazelnut to Germany and Czech Republic.

Regarding exporting price, Sioridze declares that it will be known after August 10, when Turkey will announce its price. Shelled Turkish hazelnut cost about USD 7 (per 1 kg) last year, while we sold Georgian hazelnut for USD 6.7, Sioridze says.

11) Georgian export to Azerbaijan increased, while import from this country decreased August 2nd, 2013, http://sarke.com/cgi/search/news.asp?Code=10038669

Sakstat reported that Georgian export to Azerbaijan in the first half of the year amounted to USD 332.8 million, which is an increase by 17.5% compared to the same period of the previous year.

On the other hand, import from Azerbaijan in the reporting period made up USD 273.2 million, declining year-to-year by 15.3%.

Year-in-year growth of export is visible in the following groups: cars—by 25.9% (up to USD 189.6 million), livestock—10.9% (USD 21.3 million), cement—28.5% (USD 18.4 million), carbon steel rods (armature)—15% (USD 17.2 million). In its turn, export of trucks decreased by 28.7%, totaling to USD 11.9 million (1,539 trucks were exported).

Import growth looks like this: gas—by 17.9% (up to USD 119.1 million), gypsum, anhydrite, plaster—71% (USD 9.7 million), vehicles of special purpose— USD 2.7 million (63 times). At that, import decreased of oil-products—by 36% (to USD 106.6 million) and other goods—by 33% (to USD 32.4 million).

12) Tbilisi accounts for 76% of issued loans August 5th, 2013, http://sarke.com/cgi/search/news.asp?Code=10038679

National Bank of Georgia reported that Tbilisi accounts for 76% (i.e. for 6.8 billion lari, year-on-year growth—6.7%) of total loans, issued as of June.

Lending will increase in other regions as well. For now 6% of the total loans hs been issued in Ajara (541.4 million lari, growth—8.1%), in Imereti—5.1% (459 million lari, growth—16.2%), in Kvemo Kartli— 3% (265 million lari, growth—39.5%), in Samegrelo—Zemo Svaneti—2.9% (263 million lari, growth— 17.5%), in Kakheti region—2.7% (239 million lari, growth—39%), in Shida Kartli—2.4% (215 million lari, growth—30.3%).

In the reporting period, Georgian banks issued loans totaling to 8.9 billion lari (except overdue loans).

This is a growth of 9.7% compared to last year.

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BFC. Georgian Agriculture Finance Bulletin. Issue #12, August 1—31

13) Georgian olives will be exported August 5th, 2013, http://bizzone.info/agriculture/2013/1375728923.php

Georgian-Turkish company, “Geolive” planted olive trees on 40 additional hectares.

As the representative of the company noted to the radio “Commersant”, to date, olive trees have been planted on 120 hectares. He noted that in the nearest future, Turkish representatives of the company are going to arrive in Georgia to discuss the details of building a processing facility.

Turkish side of the company is satisfied with the yield and after conquering the local market, they are planning to take the Georgian olives abroad.

Company is planning to process 80 % of the harvest into oil, while the 20% will be canned.

14) Profit of micro-financial organizations increased 2 times in q2 August 13th, 2013, http://sarke.com/cgi/search/news.asp?Code=10038767

National Bank of Georgia reported that profit of micro-financial organizations in the 2nd quarter amounted to 32.3 million lari. This showing has grown 2.3 times quarter-on-quarter.

As of June 30, total assets of micro-financial organizations amounted to 808.5 million lari, being increased by 10.9% quarter-on-quarter.

Net loans totaled to 605.3 million lari (growth—9.3%), while loan loss reserves—to 5.9 million lari (growth—7.3%).

Total liabilities amounted to 604.1 million lari (growth—12.4%).

Borrowings of the micro-financial organizations made up 451.5 million lari, increasing by 10.3% quarteron-quarter.

To note, there are 74 registered micro-financial organizations, though 9 of them still had no employees and service-centers in the reporting period.

15) In January—June cattle export to Azerbaijan increased by 60% August 20th, 2013, http://en.bpi.ge/index.php?option=com_content&view=article&id=14694:in-january-june-cattle-export-toazerbaijan-increased-by-60&catid=49:2011-11-06-16-56-03

in the first half of 2013, 8.28 tons of cattle were exported from Georgia to Azerbaijan. The total value of the live weight is USD 21.33 million, according to information published by Geostat.

According to the report, the share of this category in the total export made from Georgia to Azerbaijan is 6.41%.

During January-June 2012, 5.2 thousand tons were exported from Georgia to Azerbaijan, with total value of the live weigh USD 19.2 million. Read More »

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BFC. Georgian Agriculture Finance Bulletin. Issue #12, August 1—31

16) Reduction of citrus prices is expected in Russia after the Georgian product re-enters the market August 21st, 2013, http://bizzone.info/agriculture/2013/1377117858.php

“Georgian citrus is going to return to Russian market in November-December period and it's going to cause a reduction of the prices.”—notes Dmitry Yanin, the Head of the International Confederation of Consumer Societies.

According to him, products from Morocco, Turkey and Spain are the favorites of Russian consumers.

A leading expert of research holding “Romir”, Igor Berezin thinks, there won't be any radical changes in the nearest future, but a great factor affecting the prices is going to be the geographical location of Georgia, because it's closer to Russia than any other importer.

17) Russia rejected 19 varieties of Georgian wine August 23rd, 2013, http://commersant.ge/eng/?page=news&id=1313

In total 2.5 million liters of wine have been sent to Russia after the lifting of the embargo on Georgian wine.

The head of Rospotrebnadzor, Russia's Chief Sanitary Doctor Gennady Onishchenko told “Interfax” today.

“A total of 690 batches of alcoholic products were imported into the territory of the Russian Federation from Georgia, with a total volume of 2.5 million liters,”—Onishchenko said. Read More »

18) “Tbilvino” sees no need to subsidize vintage August 26th, 2013, http://commersant.ge/eng/?page=news&id=1320

Some wine companies do not see the need for subsidy of the “Harvest 2013”.

The company “Tbilvino” Director General explains to radio “Commersant'' that the state will pay a subsidy in the event if the purchasing companies pay 1 Gel for grapes. According to George Margvelashvili, there is no need for the subsidy for the sector and if the companies themselves would be able to fully master the crop and determine the value, it will facilitate the formation of healthy competition in the market. Margvelashvili says that last year “Tbilvino'' purchased 3 300 tons of grapes and this year will process 5 thousand tons of raw material. Read More »

19) Kviris Palitra: “winemakers expect production growth” August 29th, 2013, http://sarke.com/cgi/search/news.asp?Code=10038605

Dugladze Wine Company declares that they have exported 450,000—500,000 bottles of wine, which “is very well sold” in Moscow and its outskirts.

The company recognizes a danger of falsified wine appearance, but points that “selling of such wine in the high-class trade centres is excluded”.

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BFC. Georgian Agriculture Finance Bulletin. Issue #12, August 1—31

In its turn, Kakheti Traditional Winery has exported 250,000 bottles of wine, which is sold in Moscow and several regional cities. They are also working to enter other cities, the company notes.

Regarding falsification, the company says that it is aware about appearance of cheap wine with Georgian names in Russian trade chain and points that “such facts must be exposed and we should inform customers as well as our importers”.

20) Georgian hazelnuts gets a better position on the world market August 31st, 2013, http://bizzone.info/agriculture/2013/1375407603.php

“The biggest player on the hazelnut market, Turkey, is expecting a smaller harvest than usual. This strengthens Georgias positions”—says the chairman of the Hazelnut Exporters Union, Mamuka Todua.

According to him, overall demand on Georgian hazelnut is high and the reduced harvest in Turkey is only going to increase the realization of Georgian product. He notes that this is already visible through the present prices of Georgiann hazelnut.

Last year, the exporting price was 5 USD, this year it has gone up to 6.

To date, Georgian hazelnut is exported to 40 European and Asian countries.

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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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Copyright of articles is retained by their authors.