This strategy document formulates the objectives and principles for the development of Georgian agriculture. The main principle that will guide agricultural policy is the central role of the private sector. Therefore, the aim of the Ministry of Agriculture is to facilitate creation of appropriate business environment and to encourage private sector investment. We anticipate that much of this investment will be directed toward the expansion of agricultural exports. A second priority for the Ministry is to reduce rural poverty through support of income-generation activities among rural households. Another priority for the Ministry is to provide Georgian citizens with easy access to the markets with safe and affordable food supplies. Finally, the role of the Ministry is to support development of agricultural primary production and food processing, through providing the necessary infrastructure .
Strategic Overview and Priorities
The Ministry of Agriculture of Georgia views its primary role in facilitation of development of national agriculture through ensuring appropriate environment for increasing the private sector investments. Introduction of certain regulations leading towards establishment of market oriented agriculture should be key objective for the Ministry. Additionally, the Ministry will facilitate creation of the appropriate regulatory environment for agricultural exports and investments, which is simplified and does constitute a hindrance.
Further, Georgian agriculture should be fundamentally oriented toward increasing exports. This provides the best opportunity for growth and poverty reduction. Since the policy of the Government is to facilitate introduction of market driven mechanisms in agricultural sector, we envision that those commodities that do not have a competitive advantage in international markets will eventually be replaced by those having competitive advantage.
Given that Georgian agricultural exports were traditionally dependent on the Russian market, the sanctions imposed on Georgian agricultural products negatively affected domestic production. Therefore, Georgia must diversify its export markets. Hence, it is important to analyze and assess global trends on the international agricultural markets, concerning key export commodities for Georgia (e.g., hazelnuts, wine, citruses). Further the Ministry will cooperate with private sector producers and groups focal to the expanding production and exports.
In order to gain a better understanding of the measures necessary to encourage export diversification, the Ministry will implement several studies of the potential for expanding key agriculture exports. The Ministry will, in close cooperation with the private sector, sponsor commercially-oriented studies of key export commodities. This analysis will lead towards the development of a roadmap for expanding agricultural production and exports sector.
In line with the overall policy of the Government of Georgia, a second priority of the Ministry is the reduction of rural poverty. We believe this is best achieved through economic growth and increase exports. Nonetheless we recognize that non-export commodities have potential as import substitutes.
This policy focuses on creation of appropriate conditions for improvement of certain non-export agricultural sub-sectors. This process should also be done through attraction of domestic as well as foreign capital, which will be beneficial for the development of modern agribusiness and consequently help in formation of market based agriculture in the country.
Financing of initiatives in the agriculture sector will be mainly through budget and supplemented by the donor funds. According to the needs of the State, the Ministry perceives the funds provided by international donor community (notwithstanding it is credit or loan), as a supplementary to the state budgetary resources, allocated for the advancement of country’s agriculture. Consequently, the involvement of the Ministry in prioritization, planning and spending of allocated joint resources should be in compliance with the agricultural policy. In terms of disbursement of donor funds, financial design should be based on co-funding principle increasing beneficiary’s level of responsibility.
I. Export Commodities
Previously Georgian agricultural exports were oriented primarily towards the Russian market. This factor has not encouraged agricultural exporters to upgrade quality to a significant degree to be competitive on international markets. As a result, Georgian agricultural sector currently can be characterized by three main factors. These factors are primarily related to the quality of products, modernization of production, and engagement of market tools into development of export commodities.
One of the most critical issues for agricultural production is the quality of the products. Backwardness in technologies used, lack of modern managerial experience and knowledge of the international market trends, hinders development of high quality standards in Georgia’s agricultural production. In support of this opinion we can observe the situation that we have now concerning wine industry. Since the main export market for wine producers traditionally was represented mainly by Russia the industry was not under pressure to upgrade quality to meet requirements of markets beyond Russia. Consequently, the only way out in the given situation in the wine industry is to focus on the development of marketing strategy coupled with improvement of viticulture and wine quality, which encourages increase of productivity and higher rate of returns (increase in dollar value).
Another important factor is that Georgian agricultural production has never been truly market oriented. Thus the current production equipment for main potentially profitable export commodities is inefficient and outdated. To access the international markets with competitively processed products like juice, concentrate etc. the industry needs to modernize the processing cycle. To support sustainability of the development of the processing industry the Ministry views its role in supporting primary production through development of appropriate infrastructure (quality seedlings, plant protection measure etc.) which makes it commercially viable. Introduction of international standards of processing, packaging and transportation arrangements, will make it easier to Georgian agricultural producers to enter global markets. As an example related to this factor we can refer to the development of processing lines for citruses in Adjara, which are equipped with modern technologies. At the same time establishment of such enterprises makes small scale agriculture (small private fruit orchards) commercially feasible with poverty reduction potential.
During the last decade we have examples of successful development of new export commodities which already have significant market share on the world markets. Hazelnut production can serve as a perfect example of the development of such sector of Georgian agriculture. Market mechanisms facilitate establishment of internationally competitive sector with increased investment and therefore opportunities for growth. These results could be achieved with minimal regulatory involvement of the state and intensive involvement of private sector.
Taking into account present situation regarding main export commodities of Georgian agricultural production there are several steps that the Ministry can undertake. Series of studies should be conducted in order to research competitiveness of Georgian agricultural products on the international markets. These studies should be commercially oriented and reflect problems related to the existing regulatory system in Georgia. These analyses should contain recommendations for overall improvements in agricultural sector as well as creation of the tool to facilitate cooperation and strengthen commitment between representatives of private sector and government bodies for the development of the sector.
Marketing is another important issue for Georgian agricultural exports. Agricultural sector needs new approaches to identify best markets for distribution. The marketing strategy should search for possible niche markets where there is a real possibility to introduce Georgian agricultural products. It is also essential to mention that certain mechanism should be designed to involve private sector in the process of production monitoring, quality, branding and general decision making process concerning issues related to the problems of the agricultural sector.
The state has also to facilitate establishment of firm opportunities for foreign and local businessmen to invest in agricultural sector. Therefore, the role of the government is to create strategy for further development of Georgian agriculture. This strategy should include introduction of quality standards for processing; creation of competitive environment for primary production; formation of marketing and branding strategy; evaluate the need of certification and regulation.
II. Non-Export Commodities
Growth of the Georgia’s non-export agriculture sector is important in terms of substitution of imports and its potential for reducing poverty. It is also important in terms of preservation of unique agro-diversity of Georgian agriculture. Therefore, maintenance of non-export, but traditional sub-sectors of agriculture (e.g. wheat, malt, maze, livestock etc.), will have positive social impact ensuring food security in rural areas. Due to small size of the cultivated land, backwardness in agricultural technologies, and high cost of inputs, certain agricultural sub-sectors have low, competitive export value. Therefore, the only chance to improve competitiveness of non-export sectors is to increase their productivity.
In order to increase the productivity of non-export commodities, the Ministry plans to
· Support and encourage the adoption of improved seed varieties by improvement of seed-farming facilities (e.g. wheat, maze, malt);
· Support improved marketing mechanisms.
Dependence of the rural population on these cultures is significant. Rural population should have an easy access to quality seeds which will benefit them with high yield and quick cycle of return (one year). Hence, all mentioned measures lead to gradual development of import substitution of certain agricultural products. Increase of yield of above-mentioned cultures will contribute to creation of cheaper feed industry for livestock.
Livestock represents another important sub-sector for import substitution (dairy products). There is a real possibility for this sub-sector to become self-sufficient. Thus, breed improvement together with introduction of artificial insemination is important feature for agricultural development. In the long run perspective, livestock farming business has certain export potential.
III. Infrastructure and Support System Development
- Rural infrastructure development
Development of infrastructure in rural areas, such as roads, bridges and drinking-water supply systems, will lead to improvement in several directions within agricultural sector.
a. It will definitely become more attractive for investments and create feasibility for business development in rural areas.
b. It will facilitate job creation and hence, provide higher income level, which virtually means improvement of social and living conditions for local population.
- Land resource management
The Government should complete privatization of state-owned farms, simultaneously creating appropriate tools to strengthen land owner’s rights. The Ministry of Agriculture in close cooperation with the Ministry of Economic Reforms are responsible to create the strategy of which will ensure sustainable use of land in the country. As a first step the Government will facilitate fast privatization of available land recourses. The Government will also introduce market mechanisms to encourage economically viable use of land.
In the longer run special study should be conducted to identify value of state owned land. The land price should reflect perspective for its agricultural use (agricultural value); demand for land in particular areas of the country; and current condition of the land. Basically the target is to create market mechanisms, under which land should become a commercially viable commodity. This process will stimulate establishment of commercially oriented modern agro businesses. It will attract investments, and contribute to consolidation of considerable plots of land in the hands of particular land owners. It will consequently lead towards increase in agricultural production and decrease of its costs. Moreover, removal of uncompetitive old plants will create available land resources that could be used for plantation of high value cultures with significant export potential (for example replacement of old tea plantation by hazelnuts, bay leaf, blueberry etc.).
- Irrigation
Irrigation is essential for agricultural development. Existing irrigation systems need major rehabilitation and modernization, as well as improvement of management system. Consequently, increase of irrigated land will result in increase of productivity of primary agriculture. It is worth mentioning, that development of this system will improve access of users to the water.
Currently 80,000 ha are irrigated. In 2007 it is planed to increase irrigated land by 30,000 ha.Increase of irrigated lands will result in increase of productivity of primary agriculture. In 2007 18 mil USD will be invested by the Ministry in order to ensure the sustainability of irrigation system.
In order to improve management of existing irrigation system 4 state-owned LTD’s will be operating, which will facilitate the creation of market driven irrigation system.
The above mentioned measures will support overall development of agricultural sector, through increased participation of income generating business activities.
IV. Poverty Reduction
Since the reduction of the poverty is one of the priorities of the State, the Ministry of Agriculture, acting in full accordance with this policy, is planning to create certain mechanisms in order to reduce rural poverty. Poverty reduction in rural areas is most effectively achieved through economic growth and increased farm productivity. In the first instance, it is anticipated that rural poverty will be reduced through the expansion of agriculture exports and resulting employment opportunities.
As a first step to understanding the nature of rural poverty, the Ministry is planning to cooperate with key donors to prepare an analysis of this issue. The study should outline certain characteristics of low-income rural households, their sources of income from the agricultural point of view. Consequently, it is important to formulate position (program) of the Ministry towards poverty reduction issues in rural areas. Once completed, the Ministry will convene a workshop to discuss the causes of rural poverty and possible policy responses with the main stakeholders of the problem.
In order to facilitate improvement of living conditions in rural areas, specific projects will be implemented, with limited public funding. This projects will target low-income rural households, by providing proper means for seed-farming (quality seeds and seedlings); fertilizers; transfer of agricultural technologies; improvement of cattle-breeding; easy access to the markets. All mentioned measures are called to increase productivity and agricultural output, which in turn will enhance social and living conditions of rural population.
