NEWSLETTERIssue 3 - August 2015

In May 2015, a three-memberindependent team inspected theENPARD programme to evaluate towhich extend Georgia was fulfillingthe set of conditions agreed betweenthe government and the EuropeanUnion for boosting the agriculturesector. Their report brought goodnews: ENPARD, they found, has metor exceeded every one of its targetsso far – and the EU should thereforerelease the next tranche of €8 millionto continue the project.

When the budget support element ofENPARD was designed, it had threecore preconditions: macroeconomicstability, Public Financial Management

(PFM) transparency, and a coherentgovernment strategy for agriculture.In all three areas, the assessmentteam found excellent results.Progress in macroeconomic stabilityand PFM provide a strong basis forbudget support. The government’sagricultural strategy is extremelyrelevant.

ENPARD is also on track in terms ofthe indicators for its variablecomponent. By 19 May 2015,

Disbursement report givesENPARD the thumbs up

ENPARD has met or exceeded every one of its targets

so far

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Disbursement report gives ENPARD the thumbs up

888 agricultural cooperatives hadbeen officially registered since thestart of the programme - far beyond50 contained in the indicator. Four ofthem are “second-level” cooperatives,which are higher up the value chainthan the farmer-led cooperatives.And the number of cooperatives isstill growing.ENPARD has exceeded other targetstoo. By now, more than 30 district-level Information and ConsultationCentres (ICCs) should be providing

consultation and advice to smallfarmers across Georgia. In fact, 54ICCs have been established so far,nine of which work on a regionallevel. The report found that all ofthem are working according tointernational standards. As a result,

approximately 250,000 farmers(between 30-40% of all the farmersin Georgia) have directly or indirectlyreceived information from the ICCs sofar – a significant achievement, giventhat the ICCs only started in 2013.

Georgia is also making progress interms of agricultural statistics. In2014, Georgia carried out anagricultural census, the full results ofwhich will be published next year.This could not have been carried

In total, agriculturaloutput grew by 10%

last year

Programme

budget support to the Ministry of Agriculture

agricultural cooperativesregistered

4second-level cooperatives

(or larger scale cooperatives)

54information and consultation

centres (ICCs) of which 9 at the regional level

€8million 888

2014 Agriculture data

Export increased by

6.7%Total productionwas GEL 3.4

million

Outputgrew by

Total foodprocessed wasGEL 4.5 billion

FDI grew by $19 million

€1.37 billion(yearly average exchange rate)

10% €1.81 billion(yearly average exchange rate)

€17.2 million(yearly average exchange rate)

out without a solid data collectionsystem. Similarly, the report foundthat Georgia has a reliable andaccurate system for the collection ofagricultural prices, through annualsurveys.

The study team reserved particularpraise for the Georgian government,which it says has demonstrated

“excellent and constructive dialogue”with all stakeholders, ranging fromthe famers themselves and theircooperatives to international

organisations. The government’sawareness of further reforms thatneed to be made, and theirwillingness to pursue them, providesa strong basis for future projectimplementation.

The economic benefits of this areplain to see. During 2014, the totalvalue of agricultural production inthe country amounted to GEL3.4billion (€1.37 billion). Agriculturalprocessing created products worthGEL4.5 billion (€1.81 billion). Intotal, agricultural output grew by10% last year and foreign investorsare supporting these developments:FDI in the agricultural sectorincreased from just under $12million (€10.8 million) in 2013 tojust over $19 million (€17.2 million)in 2014.

That is making a difference toGeorgia’s stubbornly high currentaccount deficit. In 2014, the export ofagricultural goods increased by 6.7%compared to the previous year. Thishelped to decrease the negative tradebalance of agricultural goods by 7.3%compared with 2013 – and by awhopping 37% compared to 2012. ■

The economic benefitsof this are plain to see

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Hazelnuts are Georgian agriculture’sbest-kept secret. One of the country’soldest products, it is indigenous to theregion between the Black Sea and theCaucasus mountain range – historicalresearch records hazelnut productiondating back to the 6th century BC asclimate and soil are ideal for thetrees.

But the legacy is no memory to thepast and hazelnuts are becoming aleading sub-sector for Georgia’s econ-omy as production and exports aregrowing quickly. In 2014, Georgia ex-ported hazelnuts to the tune of $183million (€167.7 million) making it thecountry’s largest exported agricultural

product, outpacing wine. In the firstfive months of 2015, hazelnuts ac-counted for 8% of total exports, upfrom 2.4% in the same period of 2014.According to official figures from theFood and Agriculture Organization(FAO) Georgia is the world’s thirdlargest producer, after Turkey andItaly. And it can get better. The Ministryof Agriculture (MoA) hatched an ambi-tious plan to climb to become the sec-ond world hazelnut producer in thenext five years.

In the first forum exclusively dedicatedto hazelnuts production in Georgia held in Anaklia, western Georgia, on 15 May, organized with the

The ENPARD-financedprofessional advisedfocuses on physical

and chemicalcharacteristics of soil

and innovativetechnologies, which

will ultimately improvehazelnut quality

and foster increase of the yield.

Georgia’s agricultureis going nuts

support of ENPARD, Minister OtarDanelia detailed the state support tothe sector which includes financial sup-port for modern irrigation technologies,like drip systems, and development ofnurseries. ENPARD is also supportingthe Ministry’s plans to establish a brandfor Georgian hazelnuts.

The Deep and Comprehensive Freetrade Agreement (DCFTA), signed withthe European Union in June 2014, isparticularly important for the hazelnutsector.

Unlike other products, hazelnuts arespecifically honed towards the EU mar-ket. Georgian nuts were already cus-toms-free under the previous GSP+trade key trade deal, but the DCFTAhighlights the need to increase qualitystandards to access the European mar-ket. Five countries are the world’s topimporters – and they are all in Eu-rope. Germany, Italy, Belgium,Switzerland, and France purchase upto 80% of all hazelnuts producedworldwide.

Competitiveness of Georgian hazel-nuts production and processing de-pends mainly on three factors:quality and marketing throughout thevalue chain, increased contacts withEuropean and Asian importers andextending transformation processesin Georgia.

Growers’ unions, associations, andcooperatives play a major role asthey are in the key position to allevi-ate the disadvantages of fragmentedsmallholders and to facilitate quality-increasing measures.

Teimuraz Sigua knows it well.Kulichkari, the hazelnut cooperativein Zugdidi – Samegrelo region he’smember of, is one of the 150 coops

which have received ENPARD trainingin business planning and agro-tech-nique as well as grants to purchaseequipment. A walk-behind tractor, amowing plough, and sowing equipmentpurchased at a preferential rate (23%of market price) meant increased effi-ciency and decreased losses. Today,the 11-member strong group has atotal of 52 hectares planted with hazel-nuts – sharing costs meant access tomore inputs, higher quality machinery,and increased revenues. Through fiveNGO-led consortia, ENPARD supportssmall farmers to gather in cooperativeswith the next step being consolidationto create groups of cooperatives. Nowthe Ministry for Agriculture has plans topromote also much larger coopera-tives, which would be able to handlemodern drying facilities on behalf oftheir members. ENPARD is assistingthe ministry in this endeavor.

Increasing both productivity andknow-how is key. Currently, averageyield is 1.5 – 1.8 tonnes per hectare,but if cultivated properly, the yieldcould grow up to 2-3 tonnes. About50,000 households and small farmersproduce nearly 95% of whole Geor-gia’s hazelnuts and only 5% is pro-duced by large farms. Production ismainly divided in manufacturers ofraw nuts (farmers and households);resellers (distributors); hazelnutprocessors and exporting firms.

Training and technical support in-creases farmers’ responsibility fortheir plantations. The ENPARD-fi-nanced professional advising pro-gramme focuses on physical andchemical characteristics of soil and in-novative technologies, which will ulti-mately improve hazelnut quality andfoster increase of the yield. ■

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In 2014 Georgia

exported hazelnuts

to the tune of $183million, becomingthe first agricultural

product

In the first five

months of 2015,

hazelnuts accounted

for 8% of total exports, an increase

of 2.4% y/y

Georgiais the world’s

largest hazelnut

producer

(per capita)

50,000households produce

95% of Georgia’s

hazelnuts, 5% is pro-

duced by large farms

150hazelnuts

cooperatives have

been created in

Georgia

Hazelnuts arebecoming a leading

sub-sector forGeorgia’s economy

as production and exports aregrowing quickly

ENPARD funds two research-support projects –

€ 350,000 each, running for 18 months

Ireland’s University of

Limerick will work with the Rural and Agri-

cultural Policy and Development

Institute (RAPDI) and the Agricul-

tural University of Georgia (AUG)

GIPA and CENN will work with with the Iakob

Gogebashvili Telavi State Univer-

sity in Kakheti; the Samtskhe-

Javakheti State University; and

the Shota Rustaveli State

University of the Autonomous

Republic of Ajara in Batumi

Research has a demonstrable impact onagricultural innovation and productivity,according to the Organisation of Eco-nomic Co-operation and Development(OECD). Yet academic and research in-stitutions are marginal to Georgia’s agri-cultural development. To redress thatbalance, ENPARD is funding two newprojects – € 350,000 each, running for18 months – to strengthen study andanalysis in the sector.

The University of Limerick in Ireland willfocus on capacity building to agriculture-related education and research institu-tions, namely the Rural and AgriculturalPolicy and Development Institute(RAPDI) and the Agricultural Universityof Georgia (AUG). The project will workin four directions. It will boost the role ofcivil society in policy development bystrengthening RAPDI’s ability to carryout policy analysis and planning. It willalso strengthen the role of higher educa-tion in agriculture by supporting the AUGto develop and deliver practical, tailor-made courses for farmers and foodprocessors. Furthermore, the project willraise knowledge and awareness of stake-holders, and public in general aboutGeorgian policies and best EU practiceson mountainous and least developedareas. Awareness is also key: the projectaims at informing small-scale food pro-ducers/farmers on the benefits and op-

portunities brought by the AssociationAgreement and the Deep and Compre-hensive Free Trade Agreement (DCFTA),including the required regulatorychanges. This will include a comprehen-sive guide for EU approximation process.

The implementation team brings a rangeof relevant experience to the project.The University of Limerick, which hasworked extensively in Georgia over thepast 25 years, will provide lessons fromIreland’s own agricultural developmentexperience and the role of academic andresearch institutions there. Its team offood sector experts are well versed inworking with governments at home andabroad. The AUG is one of the country’stop universities, while RAPDI is a Geor-gian NGO established in 2014 by formersenior Government officials responsiblefor agriculture, food, and rural affairs. Itsfounders have more than 20 years ofprofessional experience in agricultureand rural development in the public andprivate sectors. The Georgian Institute of Public Affairs(GIPA) will implement the other projectwhich has a more regional focus. Entitled“Empowering Modern Research Practicesof the Regional Agriculture-Related Insti-tutions”, GIPA will work with the IakobGogebashvili Telavi State University inKakheti; the Samtskhe-Javakheti StateUniversity; and the Shota Rustaveli State

University of the Autonomous Republic ofAjara in Batumi.

The project will develop and increasethese institutions’ research capabilitiesthrough training and joint research intokey problem areas, to ensure learning inaction. It will also boost their ability toadvise regional development bodies onagricultural development, and supporttheir contributions to regional develop-ment plans. And it will promote thesebodies’ role with other players in Geor-gian agriculture, such as local govern-ments, agribusinesses, cooperatives andfarmers. As in the first project, the implementingteam will bring a diverse set of experi-ences to bear. GIPA is one of the leadingeducation institutions in Georgia withseveral schools under its activities, in-cluding the Georgian Rural DevelopmentDepartment. The Caucasus Environmen-tal NGO Network (CENN), Georgia’sleading environmental NGO, will providetechnical expertise on Good AgriculturalPractices (GAP), Climate Smart Agricul-ture (CSA) and Integrated Natural Re-sources Management (INRM). PMCResearch, one of Georgia’s leading thinktanks, facilitates economic developmentby conducting research and providingfeasible recommendations for policy-makers. It has extensive experience inconducting research and advocacy.

Research to improve innovation and boost productivity

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Research

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Modernising agriculture is a critical el-ement of tackling rural poverty inGeorgia. But, as an EU Assessment onAgriculture and Rural Development inGeorgia noted in 2013, diversifying therural economy is also key. This is whyin 2014 ENPARD-Georgia expanded itsscope to include rural development. Al-though there is currently no stand-alone rural policy framework inGeorgia, ENPARD hopes that three newpilot projects will help to guide the gov-ernment towards adopting a compre-hensive rural development approach –as Europe has successfully done overthe past decades.

A core idea of ENPARD’s rural develop-ment pilot component of €3 million isthat not everyone living in rural areasmust be a farmer – a child-care busi-ness, a guesthouse, or an ecologicaltourism activity can be supported anddevelop to keep, employ, and lift out of

poverty people living outside the cities.Each project will train on how to designa project proposal as well as budgetand business plans and identify ideasand grantees.

The selected projects will be imple-mented in three districts –Lagodekhi, in Kakheti region;Kazbegi, in Mtskheta-Mtianeti; andBorjomi, in Samtskhe-Javakheti –and they all follow the LEADERmethodology, a French acronym thatstands for “Liasons entre actions dedéveloppement rural”. The LEADERapproach states that local develop-ment strategies are more effectiveand efficient if decided and imple-mented at the local level by local ac-tors. The seven key features of theLEADER approach are: area-basedlocal development strategies; bot-tom-up approach; public-privatepartnerships; innovation; integrated,

multi-sector actions; networking;and cooperation. Each project will set up Local ActionGroups (LAGs), composed of a widerange of stakeholders ranging frompublic authorities, the private sectorand civil society, to define and coordi-nate the implementation of rural devel-opment activities. LAGs will producelocal development plans based upondetailed consultation with its members.Each project will then provide fundingto selected parts of those plans, on acompetitive basis. Extensive monitor-ing and evaluation will yield clear les-sons from the pilot projects, which willthen be collected and disseminated tokey stakeholders across Georgia. The implementing teams bring deepknowledge and skills, including rele-vant experience from Georgia and theEU. International NGO CARE will imple-ment the project in Lagodekhi with itsSpanish partner, the ETEA Foundation,

Not all farmersfrom agriculture to rural development

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a rural development organization fromAndalusia that will focus on capacitybuilding. The National Association ofLocal Authorities of Georgia will facili-tate the engagement of local, regionaland central authorities while the WorldWildlife Fund Caucasus will support theproject in developing strategies thatensure ecological diversity preserva-tion and responsible use of natural re-sources in economic activities.

People in Need, a Czech NGO, will im-plement the Kazbegi project. Its partner,the National Network of Local ActionGroups in the Czech Republic, will bringCzech experience of rural developmentto bear. Biological Farming AssociationElkana, a Georgian NGO focused on or-ganic production, innovative agriculturepractices, sustainable tourism, brandingand promotion of local products, willprovide further expertise.

Last, but most certainly not least,Mercy Corps will implement the Bor-jomi project, in collaboration withAngus Council and the Austrian FederalInstitute for Mountainous and LessFavoured Areas. Angus Council has along track record in facilitating LEADERprogramming and supporting LAGs inScotland. The Austrian Federal Insti-tute for Mountainous and Less

Favoured Areas brings broader experi-ence of the LEADER programme fromacross many regions within across Aus-tria and the EU, including mountainousregions similar to Borjomi such as Vo-rarlberg and Styria. Rural developmentmay be relatively new to Georgia, butthere are many other countries withexperience to draw from. ■

CARE / ETEA Foundation project in Lagodekhi,

in Kakheti region

People in Need/ National Network of Local Action

Groups in Kazbegi, in Mtskheta-Mtianeti

Mercy Corps / Angus Council / Austrian Federal Institute for

Mountainous and Less FavouredAreas, in Samtskhe-Javakheti region

A core idea of ENPARD’srural development pilotcomponent of €3 million

is that not everyoneliving in rural areas must

be a farmer

pilot rural development projects – budget €3 million