From the ISET Economist news (http://www.iset.ge/news/?s=survival&lang=en)
By Nino Mosiashvili
The conclusion of the Association Agreement (AA) with the European Union was euphorically acclaimed by Georgian media as well as political and economic decision makers. Part of the AA is the Deep and Comprehensive Free Trade Agreement (DCFTA). The DCFTA is intended to liberalize trade between Georgia and the EU by lowering tariffs and reducing non-tariff barriers. For agriculture, the most relevant changes relate to food safety (bacterial contaminants, pesticides, inspection, and labeling) as well as animal and plant health (phytosanitation). For the manufacturing sector, the removal of so-called “technical barriers to trade” is similarly important, with the goal being to prevent the usage of technical standards as a means to protect domestic markets from foreign competition. “If regulations are set arbitrarily, they could be used as an excuse for protectionism”, states the World Trade Organization on its homepage.
It is clear that all these agreements require unilateral adjustment of Georgian regulations to European standards. Georgia is economically too small to impose its preferences on Europe. This is stated quite frankly in the AA, when it says that it aims to “support the efforts of Georgia to develop its economic potential via international cooperation, also through the approximation of its legislation to that of the European Union”.
Whether these unilateral adjustments are beneficial for Georgia is not generally clear. European regulations do not necessarily reflect “best international practice”. In democracies, laws and regulations come about through the lobbying efforts of political interest groups much more than through rational planning. In the future, internal political decisions made in the European Union will be relevant for Georgia much more than they were previously, and it will be more difficult to pursue policies tailored to the specific situation of Georgia.
Yet Georgia hopes that the convergence to European standards will make it easier for Georgian firms to access the European market. Most critical in this respect is Georgian agriculture, as it is the sector employing the bulk of the Georgian labor force, while it is at the same time dramatically lagging behind European productivity levels. In 2013, Georgia’s agriculture accounted for only 9.3% of the Georgian gross domestic product but employed about half of the labor force. Thus, one of the benchmarks for evaluating the usefulness of the DCFTA will be its impact on Georgian agriculture.
THROWN INTO THE WATER – WILL IT SWIM?
The impacts of the DCFTA for Georgia were assessed in a report with the lengthy title Trade Sustainability Impact Assessment in support of negotiations of a DCFTA between the EU and Georgia and the Republic of Moldova. It was written by a consortium consisting of the Dutch consulting company Ecorys and the The Center for Social and Economic Research (CASE), a Warsaw-based think tank. On a broad level, the report estimates that due to trade liberalization with the EU the national income of Georgia will increase by 291.9 million euro in the long run, corresponding to a GDP growth of 4.3%. This goes along with an increase in Georgian exports and imports by 12% and 7.5%, respectively, leading to an improvement of the Georgian trade balance. But what about agriculture?
According to the study, the DCFTA will have different effects on different agricultural products, and the overall picture is very ambivalent. The output of some product categories will increase, namely vegetable oils and fats (+6.7%), vegetables, fruits, nuts, and oilseeds(+3.4%), and animal products (+3.1%), while for many other products, the output is expected to shrink, e.g. livestock and meat products (-14.8%), other processed foods (-8.8%),beverages and tobacco (-4.0%), sugar (-2.4%), and other crops (-2.0%). The report attributes the increases to reductions of EU tariffs on Georgian exports and the decreases to the reduction of Georgian tariffs on goods imported from the EU. These numbers, if they say something about the true developments, suggest that parts of Georgia’s agricultural sector will get under severe pressure due to increased competition with European producers.
ECONOMIC DARWINISM
What are the implications for Georgian agricultural policy? Some of the producers will benefit from the integration into the European market, as they can stand the pressure and even expand in this highly competitive environment. Other producers are likely to run into essentially insoluble problems. One particularly beneficial category in this respect is vegetables, fruits, nuts, and oilseeds, because some of the products in that category (e.g. hazelnuts) are labor intensive and serve niche markets. This implies that more people can be employed in the production of these goods, making the transformation to a modern, efficient agriculture less painful, and it means that competition is lower and margins are higher. If policy recognizes these advantages, producers in that category might become “national champions”.
Currently, vegetables, fruits and nuts are in Georgia primarily produced by small and medium sized farmers. Due to lack of greenhouses the production is seasonal. Yet farms can be consolidated and technical equipment can be upgraded. In the end, it will be relevant that Georgia has fundamental advantages in the production of goods in that category, namely clean soils, little usage of chemicals, a relatively large amount of available land for cultivation, and a long tradition in vegetable and fruit production.
Moreover, about half of Georgia’s current export of vegetables, fruits, and nuts already goes to the EU, which means that Georgian producers already have “a foot in the door”. Currently, the exports almost entirely consist of hazelnuts (there are no tariffs, as hazelnuts are already covered by the GSP+ regime, and hazelnuts easily satisfy sanitary and phyto-sanitary standards). Thus, while the DCFTA may not change Georgia’s hazelnuts export to the EU significantly, there may be other niche products in this category, like berries and other kinds of nuts, which may benefit from the DCFTA, for example through adjustments of Georgian regulations regarding product packaging.
It will be important that policy will subscribe to what one might call “Economic Darwinism” – do not try to keep those producers alive that are incapable of surviving, but instead create good circumstances for those that have a future in Georgia.
Finally after years of waiting punctuated by the protests of desperate rural inhabitants who have at times blocked it to highlight their plight, the Batumi-Akhaltsikhe central road, which from the top of the Goderdzi pass to Khulo is little more than a dangerous track, is to be constructed into a proper road. The Kuwait Economic Fund has signed MoU with the Government of Georgia to help with rehabilitation of the road. The funding for the project (which is estimated at 100 million GEL) has been received as a state loan to be approved by the Parliament of Georgia soon.
Rehabilitating The road, which can be justly claimed one of the most beautiful in Georgia, will immediately enhance the lives of rural inhabitants not just in quality of life but in as a boost to livelihoods as even in its current condition the road is a vital trading link between Ajara, Samtskhe -Javakheti and Kvemo Kartli as illustrated by the fact sheets.
Map: red one is Batumi-Akhaltsikhe Road and others are the longer routes.
4 Beehives and their inhabitants from the high mountains of Ajara started their new life on the terrace of one of the largest Hotels in Batumi, Georgia, the Hilton Batumi, to produce honey for hotel guests. The General Manager of the Hilton, a keen birdwatcher and conservationist had the idea, seeking to showcase the beautiful countryside of Ajara and take this first step in illustrating the story of locally sourced food and the people who produce it.
By linking the hotel with the Ajara Beekeepers Business Association, the hives were installed. Urban beekeeping is increasingly popular in Europe as bee colonies decline and new ways are sought to develop a more ecologically sensitive lifestyle as urban centers grow. The Hilton also installed a honey showpiece at the breakfast buffet, of mounted honey comb, a large map of the 10 honey production gorges of mountainous Ajara and the indigenous flora on which the bees feed with the honey and comb sourced through honey producing company Matchakhela Ltd.
These initiatives which form a part of the ALCP programme’s work in the honey market system illustrate the great potential of the honey sector to feed into the promotion of Ajara as a great and varied tourist destination.
Income received from the Hotel hives will be donated to children in need in the rural municipalities.
News travels fast and perhaps other hotels may take up the initiative now it's been advertised through the Hilton chains newsletter.
Khelvachauri Women’s Room is taking its first steps in helping women access public resources voice their opinions and participate in local self-governance. The Women’s Room model that is being replicated in Ajara was first established in three municipalities of Kvemo Kartli from 2012 and subsequently in all municipalities of Kvemo Kartli and Samstkhe-Javakheti. The first opened in Batumi with the Association of Business Women of Ajara (ABWA) in the Ajara Chamber of Commerce and Industry (ACCI) was the first of all a new type of urban and business based women’s room, with the ideas of providing business trainings and an urban connection for the municipality based women’s rooms already opened in Keda, Shuakhevi, Khulo and Khelvachauri municipalities and soon to open in Kobuleti. The rooms are proving popular with these WR’s already providing more than 1200 services in three months.
The Women’s Rooms are a municipal service, a resource and consultancy space for facilitating open dialogue between local society and municipality officials, aiming at promoting women’s participation in the decision-making at the local level and increasing their access to municipal information and services including on health care and agricultural programmes. Women’s Rooms also offer a platform for trainings and meetings, supporting new initiatives and instilling women’s active participation. The space has been taken up quickly with the Association of Young Lawyers and the School of Democracy using the rooms to raise women’s awareness on human rights, economic and educational opportunities. Visitors can use library and internet for free. All of the Women’s Rooms in Ajara are easy to access on the first floor of municipality buildings and can be freely used by people with disabilities for meeting with Gamgebeli and other officials to speak about their issues. Gamgebelis hold weekly meetings with local citizens in the W’s Rs. A Free hotline number (Khulo 0 800 100 109; Shuakhevi 0 800 000 008; Keda 0 800 100 103; Khelvachauri 0 800 100 106) allows rural women to voice their issues in the Gamgeoba.
Women’s Room coordinators and municipal Gender Advisors, were trained on the importance of women involvement in decision-making using guidelines on The Application and Implementation of the Law on Gender Equality of Georgia by local self-government bodies to increase women’s participation in the community meetings, that was resulted in significant increase from 3% (2014) to 33% (2016) of women’s participation in these meetings.
To find out more about W’s Rs ongoing activities, visit Ajara (Batumi,Khulo, Shuakhevi, Keda, Khelvachauri), Kvemo Kartli (Dmanisi, Tsalka, Tetritskaro, Rustavi,Marneuli, Aspindza) and Samtskhe Javakheti (Akhaltsikhe,Adigeni, Borjomi ) W’s Rs Facebook pages.
The first Cheese Factory in Ajara, Natural Produktsia Ltd was officially opened in Dioknisi, Khulo Municipality.
Construction of the factory started in April, 2015 and has been functioning since October. Natural Produktsia Ltd is the first and only cheese factory in upper Ajara producing Imeruli cheese currently at the largest scale in Georgia. The factory is set up with modern equipment and is producing cheese in accordance with FS&H standards. The factory collects milk from 22 villages of Khulo municipality from more than 300 farmers to date, who have now have a source of daily income. The factory processes up to 6 tons of milk daily and makes Imeruli cheese, Sulguni cheese, cottage cheese and butter. It employs 23 local farmers, out of which 11 are women. The factory is the sister factory of the family enterprise Tzesari Ltd whose factory in Sakdrioni village Tsalka produces sulguni which is sold in Carrefour in Tbilisi and in the Batumi Agrarian Market, leading hotels, such as Hilton, Sheraton, Radisson; restaurants - Porto Franco, Munchen, Pier Batumi, Riviera; supermarkets like Goodwill, Nugeshi, Nikora, Ialchin, Willmart, Absolute, etc.
Djakhangir Abasov, 2500 sheep owner from Sagarejo municipality: “It is very good and almost unbelievable that we’ll bath our ship and cattle for free. We were paying to private owners 0.5 Tetri per sheep which is 100-150 GEL for a flock plus money for the chemicals”.
Over the last 18 months, programme client Agricultural video producer Mosavali has been developing technical video lessons on key aspects of livestock husbandry and beekeeping. The videos pitched at reaching farmers through social media and no longer than 3 minutes viewing time have taken off. 9 livestock and 7 beekeeping videos have been produced and uploaded to networks.
