24 BFC Georgia Agriculture Finance Bulletin

08/2014

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24 Ge o r g i a Agriculture Finance Bulletin New State Program on Business Development in Rural Areas Introduced Despite the Ban on EU Products, Georgia Maintains Normal Trade Relations with Russia USAID Launches Project to Support Agro-Enterprises Exports of Peaches Reach 4,265 Tons in the Last 7 Months

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Georgian Agriculture Finance Bulletin Edition #24, August 2014

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

Exports Flourish Despite Russia’s Suspension of Free Trade Agreement ....................................... 2 New State Program on Business Development in Rural Areas Introduced..................................... 2 Draft Law on Land Ownership Restricts Land Acquisition for Georgians and Foreigners ............... 2 Changes made to "Produce in Georgia" Program ........................................................................... 3 Government Announces Red Grape Subsidization to Continue ..................................................... 3 Ministry of Agriculture Laboratory Signs Memorandum with NGOs .............................................. 3 Pilot Program on Agriculture Insurance to Begin on September 1st .............................................. 3 Rehabilitation of 54 Melioration Systems Planned for 2014-2015 ................................................. 4 Despite the Ban on EU Products, Georgia Maintains Normal Trade Relations with Russia ............ 4

Foreign Aid ................................................................................................................. 4 10) USAID Launches Project to Support Agro-Enterprises .................................................................... 4

Private Sector.............................................................................................................. 5 11) 12) 13) 14) 15) 16)

Vegetable, Melon and Pumpkin Prices Increase by 10.7% - Fish by 4.4%....................................... 5 "Tetri Kudi" to Produce 1,500-1,600 Tons of Mushrooms in 2014 ................................................. 5 Exports of Peaches Reach 4,265 Tons in the Last 7 Months ........................................................... 5 Ministry of Agriculture: Grape Demand Exceeds Supply ................................................................ 6 Grape Harvest Coordination Center Opened in Gurjaani................................................................ 6 Plenary Session of World Wine Trade Group Held in Tbilisi............................................................ 6

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 #24, August 2014

State Initiatives 1)

Exports Flourish Despite Russia’s Suspension of Free Trade Agreement

August 1st, 2014, http://commersant.ge/?menuid=11&id=14113&lang=2

Minister of Agriculture Otar Danelia, said that, despite Russia’s suspension of the free trade agreement with Georgia - in operation since 1994 - Georgian products continue to be exported to Russia without hindrance.

At this stage, reported the Minister, many products, including peaches and other fruits and vegetables, are actively exported to Russia. In his words, from January to June 2014, 14,000 tons of agricultural products worth USD 105 million were shipped to the country.

Danelia added that Georgia recently signed a free trade agreement with Europe and that trade relations with Russia are regulated by the World Trade Organization, of which both countries are members. Read More »

2)

New State Program on Business Development in Rural Areas Introduced

August 4th, 2014, http://commersant.ge/?menuid=11&id=14161&lang=2

The government allocated 20 million GEL to a new 3-year project for the development of business in rural areas. The project, due to begin in September, aims to stimulate the creation of micro-businesses in rural regions. Rural areas account for only 22-24% of business turnover, while almost 80% is concentrated in Tbilisi. The project aims to finance up to 3,200 micro-businesses and create 4,600 jobs.

Persons living in rural areas are invited to tender specific business plans. Each participant will receive up to 5,000 GEL for an investment of 1,000 GEL in property on their behalf. Up to 3 neighboring participants can apply as a joint venture and receive up to 15,000 GEL. Read More »

3)

Draft Law on Land Ownership Restricts Land Acquisition for Georgians and Foreigners

August 4th, 2014, http://commersant.ge/?menuid=11&id=14165&lang=2

Currently elaborated by the parliament, the ''Land Code'' will regulate acquisition of agricultural land, granting privileges to Georgians over prospective foreign land owners. The area of land which can be purchased from the state will be limited to 25 hectares for Georgian citizens and will amount to considerably less for foreigners – although a figure has not yet been given. Investment plans must comply with regional socio-economic development programs.

In addition, foreign investors will be required to have experience in agriculture and provide banking documentation demonstrating availability of investment capital. The draft law foresees a distinction between foreigners who merely want to invest and foreigners who intend to live in Georgia.

However, many of these criteria are still under discussion. Read More »

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BFC. Georgian Agriculture Finance Bulletin. Edition #24, August 2014

4)

Changes made to "Produce in Georgia" Program

August 5th, 2014, http://commersant.ge/?menuid=11&id=14200&lang=2

The conditions for obtaining soft loans under the government program "Produce in Georgia" have been loosened in order to increase the program’s effectiveness and the number of beneficiaries, said Deputy Minister of Economy Ketevan Bochorishvili. The $2 million credit limit has been abolished and the rate of real estate collateral has been lowered. In addition, program funds will no longer be used solely for the creation of new businesses but also for the expansion of existing businesses.

The aim of the program is to increase competitiveness of the Georgian economy, to reduce migration to the capital and to create income in the regions. Read More »

5)

Government Announces Red Grape Subsidization to Continue

August 7th, 2014, http://commersant.ge/?menuid=11&id=14298&lang=2

The Ministry of Agriculture retracted its plan to cancel red grape subsidization.

Under the previous leadership, the Ministry of Agriculture had decided to abolish red grape subsidies, as it deemed it was no longer justified considering the positive economic outlook for the sector. The current plan is to reduce the subsidy of red grapes by GEL 0.05 to GEL 0.15 per kilo.

In addition wine producing companies are to have access to preferential credit in 2014. Read More »

6)

Ministry of Agriculture Laboratory Signs Memorandum with NGOs

August 7th, 2014, http://www.sarke.com/cgi/search/news.asp?Code=10042050

The Laboratory of the Ministry of Agriculture agreed to cooperate with the Consumer Rights Federation and farmer, poultry and cheese-makers associations regarding the control of food safety and quality, said laboratory director Lali Madzgarashvili.

Food safety and quality control systems are a key element of Georgia’s Deep and Comprehensive Free Trade Agreement with the EU. Read More »

7)

Pilot Program on Agriculture Insurance to Begin on September 1st

August 14th, 2014, http://www.sarke.com/cgi/search/news.asp?Code=10042125

Minister of Agriculture Otar Danelia said the pilot program will be implemented by the Ministry’s Project Management Agency for the duration of one year. The Minister projected that 70% to 90% of insurance costs will be subsidized – increasing to 95% in some cases. Reimbursement will be limited to 30,000 GEL for individual farmers and 50,000 GEL for cooperatives.

The program has a budget of 5 million GEL and will included insurance companies that focus on agriculture insurance. Read More »

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BFC. Georgian Agriculture Finance Bulletin. Edition #24, August 2014

8)

Rehabilitation of 54 Melioration Systems Planned for 2014-2015

August 14th, 2014, http://www.sarke.com/cgi/search/news.asp?Code=10042113

The Minister of Agriculture, Otar Danelia, declared that the rehabilitation of 54 melioration systems is either underway or planned for 2014-2015.

According to the Minister, irrigation rehabilitation was completed on 88,448 ha (an increase of 29.31% since 2013), while drainage rehabilitation was completed on 31,848 ha (an increase of 24.68% since 2013).

He added that new water reservoirs are being constructed in Gardabani, Marneuli (both in Kvemo Kartli region), Kaspi, Kareli (both in Shida Kartli region) and reparations are being conducted on existing reservoirs in Dusheti (Mtskheta-Mtianeti region) and Dedoplistskaro (Kakheti region), among others.

The state program aims to attain a total of 278,000 ha of irrigated land by 2020. Read More »

9)

Despite the Ban on EU Products, Georgia Maintains Normal Trade Relations with Russia

August 25th, 2014, http://newsgeorgia.ru/economy/20140825/216902734.html

Agriculture Minister Otar Danelia reacted to a recent statement from Peter Stano, representative of the European Commission, recommending that EU partner countries refrain from increasing their supply of products to Russia. The comments were made in response to Russia’s ban on the import of beef, pork, fruit, poultry, cheese and milk from EU countries, the USA, Australia, Canada and Norway for the duration of one year starting August 7th. Danelia replied that Georgia would consider official statements and appeals to the government and that, to date, none had been received.

Under the new government, in power since the election of 2012, Georgia undertook major diplomatic efforts to normalize relations with Russia. These had deteriorated since the conflict in Abkhazia and South Ossetia in 2008. In May 2013, the parties agreed to resume trade relations. In 2013, Russia allowed imports of Georgian mineral water, products with low phytosanitary risk (tea, spices and bay leaf) and, more recently, products with higher phytosanitary risk (fruits, herbs, nuts). Read More »

Foreign Aid 10) USAID Launches Project to Support Agro-Enterprises August 21st, 2014, http://newsgeorgia.ru/economy/20140821/216893052.html

Minister of Agriculture Otar Danelia and USAID representatives recently discussed the progress of the project "Restoring Efficiency to Agriculture Production" (REAP).

The aim of the project is to increase rural incomes, to create jobs and to encourage investments in agribusiness. The five-year program, with a budget of 19.5 million dollars, consists of two components: grants and technical assistance. Up to 120 grants will be issued in conjunction with technical assistance.

The project also provides for the establishment and maintenance of farm mechanization centers.

In light of the association agreement with the EU, Danelia stressed the importance of leveraging international agricultural know-how. Read More »

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BFC. Georgian Agriculture Finance Bulletin. Edition #24, August 2014

Private Sector 11) Vegetable, Melon and Pumpkin Prices Increase by 10.7% - Fish by 4.4% August 6th, 2014, http://commersant.ge/?menuid=11&id=14232&lang=2

In July 2014 the inflation rate in Georgia reached 2.8%.

The price of vegetables, melons and pumpkins saw a significant increase of 10.7%, while fish also saw an above average increase of 4.4%. However, prices decreased for oils and fats (-4.9%), as well as for bread and cereals (-1.2%). This compares to an average increase of 3.4% in the price of food and non-alcoholic beverages. Read More »

12) "Tetri Kudi" to Produce 1,500-1,600 Tons of Mushrooms in 2014 August 12th, 2014, http://www.sarke.com/cgi/search/news.asp?Code=10042100

The Ministry of Agriculture announced that mushroom producer Tetri Kudi (White Hat) will increase production from 1,300t to 1,500-1,600 t year-on-year.

The company took a loan of $600,000 through the preferential agrolending program, expanding capacity by 25% and the number of employees from 120 in 2013 to 170.

As of June, 18.000 loans worth about 400 million GEL ($ 231.2 million) were issued via the preferential agrolending program.

Started in March 2013, the project aims to guarantee cheap and readily available credit for agricultural activities. It has helped create 74 new businesses in virtually all areas of the country and has allowed another 500 enterprises to expand. 13 banks, 2 microfinance institutions and 2 leasing companies are involved in the implementation of the project.

According to the Ministry, Tetri Kudi plans to join the government-initiated program “Produce in Georgia”. Read More »

13) Exports of Peaches Reach 4,265 Tons in the Last 7 Months August 13th, 2014, http://www.sarke.com/cgi/search/news.asp?Code=10042112

Minister of Agriculture Otar Danelia said a “one window” regulatory policy, allowing all necessary documentation to be collected and processed through one intermediary, permitted peach exports to reach 4,265 t by August 10th - double the figures for 2013. The Minister added that all phytosanitary standards and norms agreed with Russia have been preserved.

Of the total peach export, Russia accounts for 48%, Azerbaijan for 32%, Kazakhstan for 14% and Ukraine and Armenia for 3% each. Read More »

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BFC. Georgian Agriculture Finance Bulletin. Edition #24, August 2014

14) Ministry of Agriculture: Grape Demand Exceeds Supply August 14th, 2014, http://www.sarke.com/cgi/search/news.asp?Code=10042124

According to the Ministry of Agriculture, demand for white grapes totals 99,000 t, while the harvest is estimated at 96,000 t.

The demand constitutes 60,000 t for winemaking companies, 10,000 t for processing by state-owned companies and 29,000 t for domestic consumption.

The discrepancy is even higher for red grapes – the demand from winemaking companies alone is 50,000 t, while this year’s harvest is expected at only 30,000 t. Read More »

15) Grape Harvest Coordination Center Opened in Gurjaani August 20th, 2014, http://newsgeorgia.ru/economy/20140820/216889909.html

On August the 20th, a grape harvest coordination center will open in the Gurjaani district in eastern Georgia.

Director of the National Wine Agency, Levan Davitashvili, said its primary goal is to promote efficiency in grape harvest transfer from growers to processing companies.

Last year, during the grape harvest in Kakheti (Eastern Georgia) and Racha (Western Georgia) 88 companies received a record 92,032 tons of grapes for processing. Read More »

16) Plenary Session of World Wine Trade Group Held in Tbilisi August 25th, 2014, http://newsgeorgia.ru/economy/20140825/216902331.html

In its capacity of annual chairman of the informal association since April, Georgia is hosting the Plenary Session of the World Wine Trade Group.

The WWTG aims to facilitate wine trade between member countries of the organization. More than 100 senior representatives of public and private entities originating from member countries (USA, Canada, Argentina, Chile, South Africa, Australia, New Zealand and Georgia) will be participating in the two-day event.

Activities include a field trip to the Kakheti region, where this year’s grape harvest has already started.

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.

The articles do not necessarily reflect the opinions of BFC, its staff, its associates or its partners.

Copyright of articles is retained by their authors.