18 BFC Georgia Agriculture Finance Bulletin

02/2014

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18 Ge o r g i a Agriculture Finance Bulletin IFAD to Support New Project on Irrigation and Land Market Development Georgian Prime Minister Expects German Investment Inflows Russian “Agrico” and Israeli “Terra 1 Group” May Enter Georgia Georgian 2013 Citrus Exports Reach Record Levels

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Georgian Agriculture Finance Bulletin Edition #18, February 2014

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

Distribution of Agricultural Cards Has Begun .................................................................................. 2 The Partnership Fund to Start Functioning as a Sovereign Fund in 2014. ...................................... 2 IFAD to Support New Project on Irrigation and Land Market Development .................................. 2 Drafting of the Bill on Agricultural Insurance to Finish in 2014 ...................................................... 2 Agriculture Ministry to Establish Scientific-Research Center .......................................................... 3 Agricultural Bank Still on the Agenda .............................................................................................. 3 Preferential Agrolending Program Showing Results ....................................................................... 3

Foreign Aid ................................................................................................................. 3 8) 9)

Georgian Prime Minister Expects German Investment Inflows ...................................................... 3 Russian “Agrico” and Israeli “Terra 1 Group” May Enter Georgia................................................... 3

Private Sector.............................................................................................................. 4 10) 11) 12) 13) 14) 15) 16)

Faridi Launch Fodder Manufacturing Facility in Gardabani ............................................................ 4 Georgian 2013 Citrus Exports Reach Record Levels ........................................................................ 4 100 Applications Registered with the 7th Component of the Preferential Agrolending Program .. 4 Loans issued within the Preferential Agrolending Program Made up 245 Million GEL .................. 5 Apple Exports have Quadrupled Compared to 2012....................................................................... 5 Grape Processing Plant to be Built in Kutaisi FIZ ............................................................................. 5 EU Invests to Support Food Safety in Georgia................................................................................. 5

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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BFC. Georgian Agriculture Finance Bulletin. Edition #18, February 2014

State Initiatives 1)

Distribution of Agricultural Cards Has Begun

February 3rd, 2014, http://commersant.ge/eng/index.php?page=news&id=2541

According to the Ministry of Agriculture, 187,650 cards have already been printed and will be distributed to peasants and farmers within the program.

The program beneficiaries include farmers and peasants who own areas of land smaller than 1.25 hectares, with the level of support varying depending on the land area—up to 0. 25 hectares and 0.25 to 1.25 hectares. Read More »

2)

The Partnership Fund to Start Functioning as a Sovereign Fund in 2014.

February 5th, 2014, http://sarke.com/cgi/search/news.asp?Code=10040256

According to the Head of Partnership Fund, Irakli Kovzanadze, the switch to a sovereign fund “will allow [the Fund] to consider more low-budget innovative projects, in which we are limited now”. The stated priority areas of the Fund include agriculture along with energy, tourism and hotel infrastructure and transport infrastructure.

3)

IFAD to Support New Project on Irrigation and Land Market Development

February 7th, 2014, http://sarke.com/cgi/search/news.asp?Code=10040289

The director of the International Fund for Agriculture and Development (IFAD), Khalida Bouzar (director for Near East, North Africa, Europe and Central Asia), visited Georgia for 2 days to discuss the implementation of projects being funded by IFAD. As well as discussing existing projects, the Ministry of Finance reported that a new project on irrigation and land market development was also proposed.

Since 1997, IFAD has financed 4 agricultural projects in Georgia, with a combined value of USD 38.8 million.

4)

Drafting of the Bill on Agricultural Insurance to Finish in 2014

February 13th, 2014, http://sarke.com/cgi/search/news.asp?Code=10040343

Agriculture Minister, Shalva Pipia, announced plans to finish drafting the bill on agricultural insurance by the end of the year. Key drafting parties include the Ministry, the Agrarian Committee of the Parliament and Georgian and foreign insurance companies. According to Pipia, a key issue is land ownership, explaining that it is hard to insure agricultural products and land on sites which are not registered.

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BFC. Georgian Agriculture Finance Bulletin. Edition #18, February 2014

5)

Agriculture Ministry to Establish Scientific-Research Center

February 13th, 2014, http://sarke.com/cgi/search/news.asp?Code=10040342

The Agriculture Ministry is to establish a new scientific-research center, subordinated to the Ministry.

The first results of the center’s activity (study of seed stock) will be available in 2—3 years, and will hopefully provide opportunities for improved agricultural practice. Operations are expected to commence by the end of February.

According to the Minister for Agriculture, Shalva Pipia, former Prime Minister Bidzina Ivanishvili will hand over his own farm, located in Saguramo, to the center. Read More »

6)

Agricultural Bank Still on the Agenda

February 17th, 2014, http://commersant.ge/eng/?page=news&id=2640

On the 17th February, the Ministry of Agriculture told “Commersant”, that work on the creation of a cooperative bank is in progress and the idea of creating a cooperative bank for serving the agricultural sector exclusively is still on the agenda. Read More »

7)

Preferential Agrolending Program Showing Results

February 18th, 2014, http://sarke.com/cgi/search/news.asp?Code=10040390

The Agriculture Ministry reported that a loan of USD 535,000, issued to LLC Sabudara within preferential agrolending program, has led to the construction of an incubator and forage shop in Krtsanisi village (near Tbilisi) and allowed for the development of processing facilities for cereal crops.

According to the Ministry, the company is able to meet its own needs in processed cereals, as well as supply processing facilities to about 200 small enterprises. Sabudara is now also able to produce 77,000 eggs daily, with these eggs replacing imported ones and allowing export; with a pilot batch already delivered to Armenia. Read More »

Foreign Aid 8)

Georgian Prime Minister Expects German Investment Inflows

February 3rd, 2014, http://commersant.ge/eng/index.php?page=news&id=2540

According to the Prime Minister, Irakli Garibashvili, Germany is once again interested in investing in Georgia: “It was a very important meeting [with the President of the German Federation of Industry], as the German side expressed their interest in investing in Georgia. This was the first meeting after many years of pause.” Read More »

9)

Russian “Agrico” and Israeli “Terra 1 Group” May Enter Georgia

February 12th, 2014, http://sarke.com/cgi/search/news.asp?Code=10040332

According to the Partnership Fund, Russian Agrico and Israeli Terra 1 Group are interested in entering the Georgian market. With the agricultural sector specifically highlighted as of interest for investment.

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BFC. Georgian Agriculture Finance Bulletin. Edition #18, February 2014

Private Sector 10) Faridi Launch Fodder Manufacturing Facility in Gardabani February 5th, 2014, http://sarke.com/cgi/search/news.asp?Code=10040265

The Agriculture Ministry announced that LLC Faridi has established a granulated mixed fodder manufacturing facility in the village of Kalinino (Gardabani municipality of Kvemo Kartli region).

The enterprise represents USD 1.8 million of foreign direct investment, has a current capacity of 10 tones per hour and employs 25 people. On reaching full operating capacity, the number of employees is expected to rise to 45.

Faridi plan to make further investments in grain drying and storage facilities, as well as in the creation of an agriculture laboratory.

11) Georgian 2013 Citrus Exports Reach Record Levels February 7th, 2014, http://commersant.ge/eng/index.php?page=news&id=2577

According to the Georgian Statistical Service, in 2013 the export of citrus fruit reached record levels; increasing in comparison with 2012 by 121%.

In 2013, Georgia exported 37,000 tons of citrus, while in 2012—17,000. This is largely due to the opening of the Russian market for Georgian producers; however, Ukraine still remains the main export market for the local citrus growers.

12) 100 Applications Registered with the 7th Component of the Preferential Agrolending Program February 13th, 2014, http://sarke.com/cgi/search/news.asp?Code=10040341

Agriculture Minister Shalva Pipia declared that almost 100 applications have been registered within the 7th component of preferential agrolending program. Out of these 100 applicants, 30 are already under consideration. All 11 banks participating in the program are involved in the 7th component. The 7th component is intended for less active regions (i.e. those, where other components have not attracted any significant interest). Approved funding for this component is composed of preferential loans or leasing (50% of total sum), state grants (40%) and beneficiaries’ co-financing (10%). The total cost of project should be between USD 200,000 and 1 million.

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BFC. Georgian Agriculture Finance Bulletin. Edition #18, February 2014

13) Loans issued within the Preferential Agrolending Program Made up 245 Million GEL February 14th, 2014, http://sarke.com/cgi/search/news.asp?Code=10040357

The Agriculture Ministry reported that loans issued within the preferential agrolending program, as of February 11, equated to 244.5 million GEL. The breakdown is as follows: 45.8% (111.87 million GEL) was issued to 5,685 beneficiaries within the 2nd component, which provides credit to medium and large scale farmers. 33.5% (equivalent of 81.99 million GEL) was issued to 405 beneficiaries through the 3rd component which provides loans in foreign currency for the establishment of new enterprises and technical re-equipping of existing ones. 20.1% (49.09 million GEL) was issued within the 5th component which provides funding for grape processing plants. The 1st component, which provides interest-free loans to small scale farmers, accounted for just 0.45% (i.e. 1.1 million GEL) and was issued to 2,685 beneficiaries, who had to pay money back in the autumn. (According to the Ministry’s Project Management Agency, all loans were paid back without issue.)

Within the 6th component, 450,000 GEL was issued for 2 tangerine-purchasing enterprises, accounting for only 0.18% of total loans. So far, nobody has expressed interest in the 4th component (leasing).

Read More »

14) Apple Exports have Quadrupled Compared to 2012 February 14th, 2014, http://sarke.com/cgi/search/news.asp?Code=10040358

Agriculture Minister, Shalva Pipia, announced that in 2013, the volume of apple exports has “quadrupled” compared to the previous season. About 25—30% of the harvest has been processed, while the rest was sold in the “peak period”—January, February and March.

GeoStat reported that exports of fresh apple, quince and pear in 2013 totaled USD 395,200, increasing 53.7% from 2012.

15) Grape Processing Plant to be Built in Kutaisi FIZ February 19th, 2014, http://commersant.ge/eng/?page=news&id=2665

“Commersant” reports that Georgian-Egyptian investors are to build a grape processing plant in the Kutaisi free industrial zone (FIZ).

According to the manager of the industrial zone, the investors have already bought 30 acres of vineyards in the region. Construction of the plant is underway, where the grapes harvested from the company owned vineyards will be processed. The project envisages an investment of USD 2 million. Rkatsiteli and Sapervavi wines will be produced and exported to other countries.

16) EU Invests to Support Food Safety in Georgia February 20th, 2014, http://finchannel.com/Main_News/World/129892_No_Food_Safety_on_the_Georgian_Market%2C_Say_Experts/

According to the European Union Project Manager on Agriculture, the EU is committing more than EUR 13 million to support Georgia in improving its food safety, veterinary and pytho-sanitary standards for the period of 2013 to 2017. Read More » Page 5

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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