Agriculture and Rural Development
The significance of Georgian agriculture and rural sector
In Georgia the agriculture sector faces numerous problems and challenges which have caused the production to contract by 20% in real terms since 2005. The total sown area has been reduced by 43% and average production per hectare has diminished. Agriculture remains an important albeit still declining sector in Georgia in terms of GDP contribution, net foreign exchange earnings, employment generation and poverty reduction. In Georgia agriculture is an important safety net for most of the rural population. The sector employs around 50% of the total labour force, 95% are small farmers (+/- 1.2 hectares and 2 cows per family), therefore output is extremely low. The failure of Georgian agriculture to modernize is one of the root causes for the persistence of high poverty levels in the country. Farmers' organizations are very limited in number. Thus, the majority of the farmers cannot benefit from economies of scale nor compete with importing suppliers. The country is highly dependent on foreign imports (e.g. in 2010, 85% of the consumed wheat was imported). Other key problems of the sector are: major capital disinvestment; the Russian embargo; the world economic recession; limited access to credit (lending to the sector only accounts for 1% of total lending); absence of a functioning agricultural research-education-extension system; lack of a well-functioning land market; poor condition of irrigation systems and other infrastructures and widespread impact of livestock diseases.
According to most experts, Georgia has a significant agriculture potential, where estimates indicate that both farm production and agro-industrial production could increase fivefold from current, depressed levels. A developed agriculture can be an engine to drive economic growth and to reduce inflation (by increasing production). Growth in agriculture would also have a very positive social impact. Further development of the sector is thus critical in terms of the country's security and stability.
EU current support to agriculture
The EU has been engaged in the agriculture sector in Georgia since the 90's, initially via food security budget support programmes, and more recently through projects implemented by International Organizations, and/or NGOs. Over the past 5 years the Commission and the EU Member States have financed at least 13 medium-sized rural development projects in Georgia (€ 23 million), some of which targeted poor farmers in remote areas by establishing farmers' organizations, whereas others provided livelihoods/agriculture rehabilitation support to conflict-affected populations after the 2008 war.
The EU is also providing substantial livelihood support to Internally Displaced People (IDP) in the post 2008 war context, mainly through the Food and Agriculture Organisation (FAO) and NGOs like World Vision, to upgrade living conditions of rural IDP.
The EU is also currently supporting Georgia in the field of regional development (Sector Policy Support Programme, € 19 million), to reduce regional disparities and to stimulate economic growth. Many of regional development strategies will most likely have a strong agriculture orientation.
The plans ahead: Sector Policy Support Programme on Agriculture
The EU and the Government of Georgia are currently negotiating Sector Policy Support Programme (SPSP) for Georgian agriculture that would entitle an EU contribution of € 40 million. The programme would start by the end of 2012. The general objective of the proposed SPSP is to increase food production in Georgia and reduce rural poverty. The specific objective is to support the implementation of the national sector strategy and strengthening small farmers' organizations.
The SPSP will focus on 4 main results, all of which are integral part of the Georgian agriculture strategy:
(1) Strengthened co-operation amongst small farmers, including preparation and adoption of legislation on farmers' economic co-operation groups; awareness campaign by Ministry of Agriculture to promote small farmers' co-operation and the implementation of activities in support to newly created small farmers' organizations, including technical assistance and provision of inputs, equipment and/or small infrastructure for the farmers to increase production, gain economies of scale and to better access the markets (e.g. improved seeds, machinery, storage facilities, etc).
(2) Access to extension services by farmers is improved, via the establishment of a network of extension services and the provision of capacity building to the farmers' organizations.
(3) Geographical Indications regulated and developed, via the establishment of geographical indications' self-regulatory bodies and licensing requirements.
(4) Better performance of the institutions engaged in agriculture, including, among others, the establishment of a capacity building/training Academy under the Ministry of Agriculture; production of a new Agriculture Census; improvement of the methodology and sampling of the agriculture surveys and capacity building activities to assist the agriculture-related academic institutions.
In order for Georgia to be able to establish deep and comprehensive free trade area with the EU, the country will require significant improvements in the food safety and phyto-sanitary (SPS) fronts, and to align the SPS systems, policies and legislation with the EU regulations in these fields. To this aim, the EU provides substantial technical assistance and capacity building trough various initiatives:
A Comprehensive Institutional Building Programme (EU finding € 2.7 million) will support the National Food Agency of Georgia during 2012 in improving its functioning. A Twining Project in support of the Revenue Service of Georgia (€ 1 million) is currently providing assistance to improve the food safety border controls of Georgia. Via the FAO, the EU is assisting Georgia in controlling the foot and mouth animal disease and several TAIEX and other technical assistance actions are constantly implemented to provide further support to Georgia to improve its food safety mechanisms.
Back to Overview