Fruit Sapplings and Georgia

Fruit Sapplings and Georgia

The FINANCIAL -- There is one popular myth about Georgia that has been shared throughout generations. It tells us the story about the division of the Earth among various nationalities once initiated by the God. After celebration of their traditional feast accompanied with toasts for the God’s glorification, Georgians arrived too late for the great event, by the moment the Earth had been already divided. Having sympathy towards these people, the Lord decided to give them a piece of land he preserved for himself. The land of Georgia was referred to as the “God’s land” for its beauty since ancient times.

The beauty of the Georgian landscapes is incontestable and, what is more, there is a big opportunity enclosed in them – a potential for agricultural development. Favorable natural conditions contribute to it. For example, due to a variety of microclimates, Georgia is capable of growing different types of fruits, even subtropical ones as is the case on the western coast of the country. The central regions are well adopted for the growth of fruit gardens while the eastern part of the country, namely Kakheti region, has vast spaces covered with the vineyards. This picturesque description can be completed by mentioning a considerable number of sunny hours per year, about 1352-2520, a favorable rainfall index (1.140) as well as fresh water reserves: there are 25 075 rivers flowing in Georgia. Despite these conditions, the agriculture of the country showed the signs of a lumbering and slow growth up to the year of 2012 when the Georgian government opted for the agriculture and its strategic development as a priority for the country. 

The governmental support is readable in the statistical data. Starting from 2012, the public spending on agriculture amounted to 2.9% that is a greater index in comparison to the years 2004-2007 with an average rate of 2%. Along with the rising public expenditures, there is also a support for the sector coming from foreign direct investments (FDIs). The agricultural sector represents an on-growing field of interest for the FDIs. Their number equaled 52.9 million GEL in 2013 that is twice more than in 2012 (26.6 million GEL). The participation of international donors such as ENPARD has a positive impact on the overall dynamism of this field as well. 

In order to seize the importance of the sector, it is necessary to mention that in 2015, according to the Geostat, the agriculture accounted for 9.2% of GDP and, at the same time, created the jobs for, approximately, 55% of Georgian population. As  result of the unsuccessful agrarian reform implemented in the 90-s and waves of privatization that lead to fragmentation of farm households and propensity to subsistence farming, the agriculture sector still faces the challenges: the sector covers only 65% of local demand, while remaining products are imported from abroad. Along with it, there is a fast growing food processing industry represented by such giants as Marneuli, Kula and Campa factories with an increasing demand for raw products. 

To diminish the dependence on imports and to satisfy the local demand, several initiatives have been undertaken by the government. These initiatives will also help to develop export potential, contribute to its variety and, in this way, to mitigate the vulnerabilities to the external shocks. One of them is a project “Plant the future” run by the Agricultural Projects Management Agency (APMA).

According to Mariana Morgoshia, Director at APMA, the project aims at developing intensive gardening and stimulating the effective usage of agricultural land. The project “Plant the future” consists of two significant elements: co-financing of perennial gardens and nurseries. As far as perennial gardens are concerned, the project co-finances the purchase of saplings (up to 70%) and drip irrigation system (about 50%) that is considered to be a capital intensive acquisition. It provides the farmers, the beneficiaries of the project, with a free technical assistance. To render this information even more palpable, it is important to mention that from March 2015 till June 2016 there were 233 beneficiaries of the project and, consequently, more than 1,431 ha of orchards have been established. 

It can be an interesting deal for the foreign companies, producers of saplings, as the project also co-finances the purchase of the imported seedlings. There is a room for foreign providers as 34 Georgian certified nurseries cannot fully satisfy the local demand. The saplings are still imported from Turkey, Italy, Serbia and the USA. Some big Georgian companies - exporters such as Vanrik Agro Group, producers of blueberries, blackberries and raspberries, even have their own laboratories to work on production of seedlings as well as on the innovative methods for accelerating growth. It shows the dynamism of the sector and its search for new effective solutions for increasing the output.

Last week, Experto Consulting hosted a French delegation representing STAR EXPORT, a division of STAR FRUITS. For almost 50 years, the company has been searching for the best fruit varieties worldwide to make them readily available for arboriculturists. During the official visit in Georgia the delegation met with all important stakeholders of the industry representing both public and private sectors. Director Serge Escorihuela and Export Specialist Yevgeniya Zenina assessed the opportunities of the Georgian market and they were able to acquire satisfactory answers from the prospects. Star Fruits constantly searches for innovative solutions thanks to their rich selection of available varieties and Georgia could benefit from shared experience.

The entry to the market will be even more welcome for foreign investors because there are few Georgian entrepreneurs willing to get involved in the sector. Giorgi Chonishvili, the Director of Complex Agro that has been present on the Georgian market for more than 12 years, gives the following explanations to this situation: “the profit to the sapling nurseries comes in a long term, to be more precise, approximately, in four years because the production of saplings has an 18 month cycle”. This condition makes the environment less attractive to the new comers, beginners in the field of seedling production.

According to Mr. Chonishvili, another perspective will await for the companies introducing to the Georgian market the seedlings with enhanced properties, prone to the accelerated growth because a great number of locally based nurseries still use out of date technologies for seedling production. There is also a high demand for the rootstocks from the orchard owners.

The foreign companies with secure capital will be able to create a competitive product because of the usage of better facilities seedling nurseries require, such as greenhouses and/or drip irrigation systems. They will also have an opportunity for tapping into a big export market represented by such countries as Uzbekistan, Russia and China.

Furthermore, the foreign entrepreneurs can rely on the guidance of Scientific-Research Center of Agriculture (SRCA) that works in collaboration with Agricultural Projects Management Agency.  SRCA has conducted research works determining the best perennial plants to be planted in different regions of Georgia that can become useful guidelines for the interested companies.

General favorable business environment in Georgia is also an important contributor to the attractiveness of the sector. Georgia is a transparent country with no corruption, a low cost labor market and a low-level taxation system. Low land cost could be mentioned as another opportunity: 1 ha of good quality agricultural land costs about 2.5-5 thousand USD. Moreover, there still are available arable lands in Georgia. Only in the region of Shida Kartli there is a potential for growth of 10 thousand ha of orchards that in turn implies a necessity of additional 2.5-5 million seedlings for the region.

Even with a creation and extension of the orchards in Georgia, the local demand for seedlings will always persist because of the process of natural renewal. Due to this process, some seedlings die and should be renewed. This particularity of the nature offers further prospects for the development of the market of seedlings in the country.

Uniting together such factors as favorable climate conditions, business environment and the governmental support, Georgia becomes an attractive destination for sapling production. With its 44% of arable lands, the country has all the potential to become the country of the orchards that will be another justification for its mythical attribute – the God’s land.