29 BFC Georgia Agriculture Finance Bulletin

01/2015

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29 Ge o r g i a Agriculture Finance Bulletin JSC Partnership Fund Launches Tender for USD 7 Million Cold Storage Facility Foreigners Regain Right to Own Agricultural Land under Certain Conditions Davos: Louis Dreyfus Group Interested in Investing in Georgian Agriculture National Food Agency Introduces New Regulations

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Georgian Agriculture Finance Bulletin Edition #29, January 2015

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

Georgia Considers Shifting Wheat Imports from Russia to Europe and US .................................... 2 Nut Production Development Strategy to be Introduced ............................................................... 2 Georgia and Russia Agree Agro-Export Regulations at International Green Week ........................ 2 JSC Partnership Fund Launches Tender for USD 7 Million Cold Storage Facility............................. 3 Ministry of Agriculture Promotes Production through Taxation Policy .......................................... 3 Foreigners Regain Right to Own Agricultural Land under Certain Conditions ................................ 3 Small Farmers to Receive GEL 60 Million in Support through Cards Scheme in 2015 .................... 4

Private Sector.............................................................................................................. 4 8) 9) 10) 11) 12)

Badagoni to Launch New Products in 2015 ..................................................................................... 4 Davos: Louis Dreyfus Group Interested in Investing in Georgian Agriculture ................................. 4 Russian Ruble’s Devaluation Impacts Georgian Wine Exports ........................................................ 4 National Food Agency Introduces New Regulations ....................................................................... 5 NGO “Young Barristers” Recommends Tough Stance on Foreign Land Ownership ....................... 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 »

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BFC. Georgian Agriculture Finance Bulletin. Edition #29, January 2015

State Initiatives 1)

Georgia Considers Shifting Wheat Imports from Russia to Europe and US

January 12th, 2015, http://en.bpi.ge/index.php?option=com_content&view=article&id=19379:georgia-may-import-wheat-fromeurope-and-us-instead-of-russia&catid=920:2011-11-06-16-35-52

In light of Russia’s recent reduction in wheat exports, the Georgian government discussed increasing domestic yields and sourcing wheat from the EU and US – 90% of Georgia’s wheat is imported from Russia.

Head of the Association of Bakers, Levan Silagava, said the government intends to import the wheat itself, on-selling to local mills. Kazak wheat was ruled out due to its high price. The change in Russia’s export volumes is due to difficulties it faces in meeting local demand, he added.

The price of a sack of flour currently stands at 35-36 GEL, potentially reaching as much as 45 GEL, reflecting the recent 50% increase in the price of Russian wheat, said Silagava. Read More »

2)

Nut Production Development Strategy to be Introduced

January 15th, 2015, http://www.commersant.ge/index.php?m=5&news_id=17919&cat_id=6

The Ministry of Agriculture and the Union of Nut Producers and Exporters are close to establishing a nut production development strategy.

The Union’s Chairman, Alexander Motserelia, said that, though Georgian nuts are of high quality, growing methods and preservation techniques are poor due to lack of know-how – however, Georgian nuts are still competitive in global markets, he added.

There have been recent fluctuations in the price of nuts, Motsereilia said, noting that 1kg of substandard nuts moved from GEL 8.50 in the summer to 8.70 today.

3)

Georgia and Russia Agree Agro-Export Regulations at International Green Week

January 19th, 2015, http://en.bpi.ge/index.php?option=com_content&view=article&id=19420:georgia-and-russia-discuss-agroproducts-trade-opportunities-in-berlin&catid=42:2011-11-06-22-59-58

The Director of the Georgian National Food Agency, Zaza Dolidze, and Director of the Russian Federal Service for Veterinary and Phytosanitary Surveillance (Rosselkhoznadzor), Sergey Dankvert, signed an agreement regulating Georgian agro-exports to Russia at the 80th International Green Week, a food and agriculture trade fair held in Berlin.

Pending the development of testing facilities in Georgia, all analyses will be performed at Rosselkhoznadzor’s own quarantine center in Russia. The parties also discussed Georgian exports of fish, honey, sunflower, corn and vegetables to Russia. Agricultural trade turnover between Georgia and Russia currently totals USD 200 million.

Georgia’s Minister of Agriculture Otar Danelia held meetings with the representatives of the agriculture ministries of Germany, Latvia, Holland, Turkey, Lithuania, Bulgaria, Hungary, Uruguay, Belarus and Argentina. Topics included export opportunities, food safety, land management, and cattle imports.

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BFC. Georgian Agriculture Finance Bulletin. Edition #29, January 2015

4)

JSC Partnership Fund Launches Tender for USD 7 Million Cold Storage Facility

January 21st, 2015, http://sarke.com/cgi/search/news.asp?Code=10043439

State owned JSC Partnership Fund launched a tender for the joint financing of a USD 7 million fruit and vegetable cold storage facility. The project includes provisions for the collection of produce from farms.

According to the fund, the facility’s 4,700 ton storage capacity will meet demand for Tbilisi and Rustavi – together accounting for 30% of Georgia’s total food consumption.

JSC Partnership Fund was established in 2011 and currently holds more than GEL 5 billion in assets.

Partnership Fund was established by the government in 2011. Assets of this wholly state-owned entity exceed 5 billion lari.

5)

Ministry of Agriculture Promotes Production through Taxation Policy

January 22nd, 2015, http://sarke.com/cgi/search/news.asp?Code=10043454

The Ministry of Agriculture reported the continuation of its production promoting taxation policy.

Measures include reducing taxes for small individual farms and increasing taxes on plots larger than a couple dozen hectares left uncultivated for lengthy periods.

Of the 750,000 hectares of arable land, only 400,000 are cultivated, said the Ministry, adding that it is paramount to support farmers that use arable land for the cultivation of high quality produce.

6)

Foreigners Regain Right to Own Agricultural Land under Certain Conditions

January 23rd, 2015, http://agenda.ge/news/28568/eng

Foreigners are to regain the right to own agricultural land under certain conditions.

Agricultural land ownership is open to the state, local governments, public entities, Georgian citizens, international financial institutions and legal entities registered in Georgia in accordance with Georgian laws.

As before, foreigners may purchase agricultural land only if they have a residence permit and 5 years’ experience in agricultural activities within Georgia. Foreign companies, citizens and companies established in Georgia by foreigners will not be able to purchase land within 5 km of national borders.

The new conditions allow foreigners to benefit from the same privileges as Georgians if the agricultural land was inherited, if they are members of a farm created by Georgian citizens or if they are married to a Georgian citizen. Should the foreign citizen leave the farm or divorce, they will be able to retain their property if they meet the other conditions for foreign ownership.

Should they fail to meet these conditions, they must sell their land within six months or the Ministry of Economy will take possession of the land on behalf of the State.

Two years ago, a moratorium on foreign ownership of land was introduced, which was later declared invalid by the Constitutional Court.

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BFC. Georgian Agriculture Finance Bulletin. Edition #29, January 2015

7)

Small Farmers to Receive GEL 60 Million in Support through Cards Scheme in 2015

January 26th, 2015, http://sarke.com/cgi/search/news.asp?Code=10043473

Minister of Agriculture Otar Danelia said 800,000 small farmers will benefit from GEL 60 million allocated to agricultural activity support and the agriculture card scheme in2015. GEL 140 per hectare is to be allocated to ploughing.

This will bring the 3 year support program for small farmers to an end, said Danelia, adding that 400,000 hectares have been cultivated through the program.

In the meantime, the Minister envisages a taxation scheme to encourage sowing of uncultivated land, currently totaling some 350,000 ha. The taxation scheme, used effectively in many European countries, lowers taxes for cultivated agricultural land while increasing taxes for uncultivated agricultural land, according to Danelia. The taxation scheme does not apply to farmers with land up smaller than 5 hectares, he added.

Private Sector 8)

Badagoni to Launch New Products in 2015

January 6th, 2015, http://en.bpi.ge/index.php?option=com_content&view=article&id=19362:badagoni-to-launch-new-productsin-2015&catid=28:2011-11-06-17-04-50

Badagoni – a winery – plans to launch new products throughout the year, notably a sparkling wine, said company founder Gogi Salakaia. In 2014, the company exported a record 4 million bottles of wine, while investing USD 5 million in a new production line.

9)

Davos: Louis Dreyfus Group Interested in Investing in Georgian Agriculture

January 22nd, 2015, http://www.commersant.ge/index.php?m=5&news_id=18071&cat_id=5

Following meetings with the Georgian delegation at the World Economic Forum in Davos, Louis Dreyfus Group –one of France’s largest companies – expressed interest in investing in Georgian agriculture.

The group has interests in over 100 countries and commands a budget of USD 9 billion.

10) Russian Ruble’s Devaluation Impacts Georgian Wine Exports January 22nd, 2015, http://www.commersant.ge/index.php?m=5&news_id=18079&cat_id=6

Nutsa Abramishvili, CEO of Schuchmann Wines, said 10 trucks loaded with 100,000 bottles of wine were stopped just outside the Russian border due to problems engendered by the ruble’s devaluation.

According to Abramishvili, while the goods have already been sold and excise stamps pasted on the bottles, payment has not been received due to issues with currency transfers abroad, adding she hoped shipment will be resumed in February.

Jimmy Chkhaidze, joint founder of Askaneli Brothers winery, said the ruble’s instability has led to the complete suspension of shipments, and the company has received no orders for January.

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BFC. Georgian Agriculture Finance Bulletin. Edition #29, January 2015

Tbilvino also received no orders for January. CEO George Margvelashvili expects exports to Russia to decrease significantly in the first half of 2015, though the company still plans to ship 100,000 bottles in February.

George Samanishvili, the head of the National Wine Agency, says that, while the ruble’s devaluation has clearly effected Georgian exports, the exact extent cannot currently be evaluated.

11) National Food Agency Introduces New Regulations January 23rd, 2015, http://www.commersant.ge/index.php?m=5&news_id=18097&cat_id=5

The National Food Agency is to introduce new phytosanitary, veterinary and food safety regulations.

To facilitate control measures, a single agro-business registry will be created. Businesses have until the 1st of June to apply.

Other measures include: the obligatory labeling of genetically modified ingredients; further development of honey, nut, milk and dairy product standards; and a unified cattle database.

The new regulations will promote competitiveness and improve quality, said the Agency.

12) NGO “Young Barristers” Recommends Tough Stance on Foreign Land Ownership January 28th, 2015, http://sarke.com/cgi/search/news.asp?Code=10043509

Young Barristers, an NGO, said agricultural land ownership rules for foreign citizens are in keeping with international norms. As agricultural land has economic, social and cultural value, the organization reiterated the importance of such controls.

Young Barristers recommended that foreigners be required to have 5 years’ residency and present a strong development plan before being allowed to purchase agricultural land.

Additionally, the NGO recommended that rules on land status changes be toughened in order to prevent circumvention of the laws by foreign entities attempting to purchase agricultural land. At the moment, status changes are too easy, said the NGO.

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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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