Issue 2, 2012. April-May



Vincent Boivin,
Research Associate,
GeoWel Research

Employing around 53 percent of the Georgian labor force, no-one doubts the importance of the agricultural sector. However, until very recently it has not been a key focus of the Georgian government or private investment. In the last two years though, this situation has started to turn around dramatically and the government has undertaken significant actions to revive the long forgotten sector.

There are many signs of this re-awakened interest in the sector. According to Kote Kobakhidze, Deputy Minister of Agriculture, the government has recently approved the first draft of a long-awaited Agriculture Development Strategy. This is the first time the government has had a strategy of this kind since the Rose Revolution and it is currently under review by stakeholders.

The numbers are also impressive. In 2010, the Ministry of Agriculture had a budget of 30.6 million lari. This number will have increased fourfold to almost 120 million lari by the end of this year, according to latest budget projections.

A large proportion of the government's budget is channeled through the Georgian Agriculture Corporation (GAC) and its five subsidiaries.

Currently, GAC draws funding from the state budget although the recently created Agriculture Development Fund (ADF), under the Ministry of Economic Development and the Ministry of Agriculture, will allow the corporation to also draw funding from different sources including equity funding, joint ventures, grants, and foreign direct investments (FDI).

The GAC is managed by a board of directors that represents a range of different government ministries.

As stated by General Director, Giorgi Jakhutashvili, GAC's main goal is to boost commercial agriculture in the country and to alter the low input/low output model that actually characterizes Georgian agriculture. Thus, high quality inputs such as seeds, pesticides and fertilizers are being sold to farmers. New farming techniques and modern technologies are also being displayed and made available through a diverse range of projects.

For instance, the organization is currently implementing a 7-8 million lari demonstration plot program entirely funded by the Ministry of Agriculture, which intends to cover a total of 450 to 500 hectares in 8 different municipalities/communities. Although managed entirely by GAC, through trainings and consultations farmers will be introduced to different types of irrigation systems and their impact on production, different agro procedures for seeding and harvesting, and the proper use of pesticides and fertilizers.

Since machinery service centers are not yet operational, the corporation provides farming services through mobile units stationed in more than 30 municipalities. So far, GAC helped to cultivate 25 thousand ha of land in 2010 and increased it to 49 thousand ha in 2011. With the completion of the 12 regional service centers in early spring, these figures are expected to grow drastically.

However, the organization's work is not without controversy. Its activities are mainly oriented towards larger, commercial farmers, while support and accessibility for small farmers is limited. For example, storage facilities, quality agricultural inputs and machinery services usually target professional farmers with the ability to pay.

This means that small farmers may not have access to the services, or may lack the knowledge or resources to make use of them.

An illustrative case in point is the government's maize program which GAC carried out last year. This project received a lot of negative media attention. In total, over 30,000 farmers participated in the project and were given the opportunity to purchase imported hybrid seeds on credit from the American company Pioneer.

Larger farmers seem to have been successful increasing their yield from 1.8 to 4.6 tonnes per hectare, on average, according to GAC's Director Giorgi Jakhutashvili. However, the majority of the participants who were small farmers encountered serious drawbacks, some achieving very low yields and some no harvest at all.

Despite these setbacks, GAC considered the project a success.

Robert Revia of Cartlis, a leading Georgian agriculture company, who has been working successfully with Pioneer for seven years, provided a similar analysis of the situation. "I wouldn't say that the Government's project failed. The people who failed created a lot of noise and it became a political issue, but most of these people did absolutely nothing in terms of irrigation, pesticide and fertilizer use," he said.

GAC and the government are now faced with a difficult dilemma. There is a consensus that Georgia's small farmers should be given a fair chance at ‘survival' by receiving increased support and access to the services offered. Yet, experiences so far have led the government to conclude that working with small farmers is not commercially viable.

Faced with this situation, the government tends to push for investments that mainly target semi-commercial farmers, commercial farms and agribusinesses.

For the time being, the main flaw of the approach is that that there are no other prospects of employment for small farmers in Georgia's rural areas, thus trapping them in a vicious poverty circle. However, even if access to services and projects remains restricted for small farmers, it will most certainly be improved.

There is a general consensus among experts that the government's increased investments in agriculture are a step in the right direction given that semi-commercial farmers, commercial farms and agribusinesses will benefit from the range of new services available. The challenge that remains is trying to widen accessibility so that the increased opportunities which GAC brings can be provided to all.

GeoWel Research is a Georgia based research consultancy. The data contained in this article was gathered for a large agriculture analysis currently being undertaken by GeoWel Research for UNDP.