Unlocking the export potential of Georgian agriculture - Summary of Results-

Transcription

1 Policy Briefing Series [PB/02/2017] Unlocking the export potential of Georgian agriculture - Summary of Results- in cooperation with Andrei Maximov, David Saha Berlin/Tbilisi, April 2017

2 How can Georgia strengthen its agricultural exports? Georgia s agricultural sector is big, but lacks productivity 8% of GDP, but around 50% of workforce in agriculture Result: Agricultural trade deficit of 2.6% of GDP in 2016 Adds to general trade + current account deficits Aim of this Policy Briefing : Recommendations for boosting agri-food exports Structure of the Policy Briefing o Analysis of current agri-food exports o Identification of potential o Constraints on current exports o Options for producers o Policy recommendations 2

3 Highly concentrated current exports of agri-food products Composition of agri-food exports, Live animals 7% Other 18% Fruits and nuts 28% Source: UN Comtrade Beverages, spirits and vinegar 47% High concentration in few products: Beverages, fruits and nuts Concentration in more demanding markets even greater: Nuts make up 65% of agri-food exports to EU, over 80% to Germany Over 60% of exports go to undemanding markets in CIS countries Agri-food exports very undiversified, vulnerable to shocks on few markets 3

4 Potential for diversification: High-value niche goods Basic conditions of Georgia Diverse climatic conditions Relatively small land area Fragmentation of land due to topography and ownership (75% of holdings are smaller than 1 hectare subsistence farmers) Less suited for bulk commodities (e.g. cereals, oilseeds) Well suited for diverse niche products, (certified) organic products Examples: Berries, high-value fresh and processed fruits (e.g. kiwi or feijoa), hybrid fruits (e.g. grapple: grape + apple), hybrid berries and medicinal herbs Such products, if they meet quality standards, can be sold for good margins at demanding (e.g. EU) markets Need to overcome two constraints 4

5 Constraints: 1. Too little production Reasons: State of agricultural land and farms Fragmentation of plots Degraded / aged plantations and orchards Lack of high quality seed and planting material Vulnerability to pests and plant diseases Poor diversity of crops and varieties Skills of farmers, cultural factors Traditional mistrust of innovations Short planning horizons Predominance of informal relations business by unwritten rules Lack of raw materials limits export potential at present Need to improve agricultural production, not just export promotion 5

6 Constraints: 2. Product quality insufficient for export Poor organisation of export chains often leads to low quality Underlying problem Weak or absent long-term links between stakeholders (producers, input and service suppliers, processors/consolidators and traders) Results in quality and documentation problems: Negative commercial consequences: Unsatisfactory sorting and calibration Lack of financial motivation to improve quality Lack of quality control Lack of comprehensive legal documentation No repeat clients No long-term contracts No predictable contract prices Georgian products confined mainly to most undemanding markets (e.g. CIS cash markets) Need to foster better coordination between actors in export chains 6

7 Example: A mandarin export contract Initial Contract Actual outcome: price reduced by the buyer because of low quality Possible 2 nd best outcome Tons Price per kg, USD Total Sales, USD 448, , ,100 Total Costs, USD 292, , ,423 Income, USD 156,078 91, ,677 Sale of sub-standard fruits to Kobuleti, USD 0 0 4,538 Total income 156,078 91, ,215 Due to inadequate sorting by producers, contract volumes and quality could not be fulfilled Highlights need for technical inspection of export shipments by international companies to improve quality 7

8 Recommendations for the private sector Founding agricultural clusters (wider) or Productive Alliances (PAs, narrower) can help improve actor coordination in export chains Clusters: Companies and institutions in related value chains engage in cooperative projects, e.g. joint training, standards implementation, branding, joint marketing activity PAs: Companies in a single value chain cooperate in order to make final product more valuable as export, e.g. by aligning interests, fair risk sharing, better quality control and documentation Making use of international companies for technical inspections Ensures product quality (=> prices) for export shipment Improve organisation of/quality control in export chains Strategic, gradual development of destination markets: Developing from less to more demanding markets Gradually learning to conform with harder requirements These options are compatible and complementary 8

9 Policy recommendations Work on short term and structural constraints affecting Georgian exports Structural: Enabling consolidation of fragmented agricultural land Complete cadastre so land can be sold Disentangle social from agricultural policies Short/medium term: Support and leverage agricultural clusters and PAs Cooperation will help overcome fragmentation problems Promote founding by information about concepts Potentially support in context of a wider cluster policy initiative Address with public projects: Adjara PA example, in annex Short/medium term: Adress information shortages Provide information to farmers: Crop/varieties choice, market information and legal documents help for potential exports Example: University of Califonia, in annex 9

10 Example of public project targeting PAs Adjara PA project for consolidation and diversification To plant new large (20 hectares) commercial cooperative mandarin orchards with new seedlings from state nurseries To motivate farmers to uproot overaged mandarin trees by giving them a share in the future cooperative based on the principle one seedling planted for each uprooted old tree To provide farmers with a possibility to receive seedlings for other high value crops and/or early/later varieties To consolidate specific crop by PA development to provide farmers with necessary inputs, services, agro expertise, certification, branding and marketing with payment by the future harvest 10

11 Contact Andrei Maximov David Saha c/o BE Berlin Economics GmbH Schillerstraße 59, D Berlin Tel: /

12 Annex: Existing successes of Productive Alliances Taplikatsi beekeeping farm at Alaverdi monastery. Without any formal contracts with its 15 suppliers, Taplikatsi delivers training, extension services and inputs, and arranges joint beehives migration trips, ensuring a high quality and uniform honey, which is sold through duty free shops and exported to China. Nergeta Co. - highly intensive, high-quality and modern kiwi plantation with exports to Germany and Japan. Local farmers work under the supervision of company specialists, acquiring new skills, agronomic expertise and start providing Nergeta with their own kiwi. Michail Gogiashvili - an individual Gurdjaani farmer producing high quality peaches and nectarines on 50 own and 120 contracted hectares. He is a highly reputable expert providing local farmers with agronomic recommendations for many years. He could become a perspective consolidator for successful PA and/or MA if supported by necessary infrastructure, equipment and marketing. 12

13 Annex: Example of information services for farmers The University of California Cooperative Extension service provides up-to-date, knowledge-based assistance and advice to farmers in California based on publicly-funded research and a long history of cooperation with local producers. As an example, the figure above shows the first two pages of a publication on the costs of producing blackberries. 13