Issue 5, 2012. October-November



Entrepreneurs and policy makers are betting on new initiatives to bolster agriculture production in the country – and take the first steps to turning Georgia into an export and reexport hub for food products.

Nino Patsuria

With Georgia's unique climates, soil types, and delicious produce, few disagree with Georgia's potential as a regional center for agricultural goods. The question, however, is how to tap into it.

Currently the statistics are not encouraging: Georgia imports 80 percent of the food it consumes, according to official statistics. In addition, the agriculture sector has been steadily shrinking - from 47 percent of GDP in 1995 to just nine percent today.

Giorgi Tsikolia, the director of the Department of Investment and Export Policy at the Ministry of Economic and Sustainable Development, believes Georgia's current - and future - trade agreements provide a valuable key to get out of the country's import rut by making exports more affordable.

Georgia has long standing agreements with some former Soviet republics as part of the Commonwealth of Independent States (CIS). In addition, Tbilisi benefits from long-standing, duty-free agreements with the United States and the European Union, and is in the process of negotiating comprehensive free-trade agreement with Brussels. All of these agreements and negotiations should make exporting more profitable.

"Since the Rose Revolution, Georgia made it a priority to become a regional hub from many directions, including agriculture and logistic, as well as financial and tourism," he said. "[Trade agreements] coupled with our simple business-oriented taxation policy, corruption-free environment, low-cost labor force, and geographic location, will boost plenty of new enterprises, logistic centers and other industries to be developed in Georgia."

New solutions for better products

However, agriculture specialist, Davit Shervashidze, a senior advisor in Agribusiness Sector at Georgian Regional Development Fund of SEAF (Small Enterprise Assistance Funds), noted that if Georgia received a free trade agreement with the EU today, it would not have the goods to export.

Part of the problem boils down to financing. Farmers do not have sufficient access to affordable bank loans. But an equally challenging problem is quality.Entrepreneur, David Lee, the general manager of MagtiCom Ltd. and the owner of a large farm in Imereti, said that, with the proper strategy, Georgian agriculture can find a market overseas. Armenia and Azerbaijan are both promising markets for meat, he noted, and selling wine and out-of-season vegetables to Europe and other countries could be profitable niche markets.

"With six climatic zones and 26,000 rivers, I believe the businesses themselves will find and develop markets once we get the focus and strategy better defined and some pilot projects underway," he said.

A new government initiative - part of the 10-year strategy for agriculture that was approved in the spring - will help, officials say. Currently the Ministry of Agriculture, together with the United Nations Food and Agriculture Organization, are devising a four-year action plan to improve irrigation, increase access to modern farming techniques, develop export infrastructure, and set up new enterprises.

One of the first steps in this strategy was creating the State Fruit and Vegetables Export Company LLC. Launched during the summer, the company is charged with helping farmers export their goods to markets overseas by taking care of marketing and logistics.

The first test for the new policy will be in the Ukrainian market, where the company is focused on ensuring quality - and quantity - delivery, noted Giorgi Jakhutashvili, the head of the export company.

Jakhutashvili believes his company will serve as an "ice-breaker" for the private sector. Businesses can benefit from the state's market research and logistics policy, not to mention its work breaking into new markets, he says.

The state-owned company is also investing in cold-storage facilities in Ukraine to help ensure high quality. Jakhutashvili noted that once Ukrainian traders were convinced that Georgia could provide for the middle and hig segment of the market, demand increased from other countries too.

"We ensure marketing and logistics of the harvested product from the fields to the shelves of the export market in line with international standards," he said, adding that the state company's budget allows it to ensurethat there are enough goods exported to meet the demand in the new markets.

Among the other initiatives also at work in the private sector is the use of education to change farming practices. Kakha Bendukidze, a former economic minister, is working to reform the private sector from the ground up. Last year he purchased the Georgian Agricultural University.

The newly renovated university will prepare Georgians to modernize the country's agriculture sector, according to Lasha Gotsiridze, the university's rector. "It is an open secret that successful agricultural business hires foreign technologists," he said. "Now we prepare cadres who get western educational skills in all the agriculture-related jobs, both land farming and food processing, and so forth."

The university hopes to become the leading scientific-research center in the South Caucasus.With a full spectrum of labs for both educational and scientific-research purposes, it is trying to attract Georgian scientists working at leading universities abroad.

Scientists at the university are working to develop a new species of endemic wheat and grapes. They are even experimenting with the creation of a new type of Georgian bee as part of the genetic research happening at the lab.

These efforts are expected to help Georgia establish a brand name on the international market, said Kakha Didebulidze, the head of the educational microbiology lab at the university.

"Everybody knows that Chinese silk is the best. The world should learn that Georgian wine and Georgian wheat are very good once and for all," he said.

"On the innovation side, we prefer to focus on an endemic Georgian specimen from a pure marketing point of view, to embed a Georgian product at the market. Based on these researches we actually make a passport to our endemic product to raise awareness of Georgian wine brands, vine, wheat, honey and bee, like everybody knows that the Chinese silk is the best, the world should learn that Georgian wine and Georgian wheat is very good once and for all."