Thursday, January 20, 2011

Georgian Agricultural Lost Opportunities, Mad Food Prices

With prices 'going mad' Georgia should focus on increase of its agriculture production, he said.

So, he finally admits that all of these aid programs, USAID, MCC, TACIS, EU, etc have failed to achieve their goals? This is ammo for the opposition - I wonder if they realise?

The efficiency of production in Georgia is very low compared to Turkey and other countries, especially in terms of value added chains and established marketing structures. This is partly the consequence of lack of investment over the last 15 to 20 years (and before that, due to poor planning during the Soviet era).  Many carry-overs and disincentives are deeply rooted in the system.

 Economic development is further complicated by the well-established system of attracting imports from neighboring and regional countries, often at unreal prices, and the profits are tied with a small elite that is well-connected to the government. 

Food safety is a big problem here, as in HACCP, and there are problems in securing quality products from farmers in suitable volumes of a consistent quality. There is also little trust between rural populations and those along the value-added marketing chain.(NB a recent article in IWPR, Nov 2010, "Georgia Struggles to Compete with Turkish Economy" reflects many of the same concerns)


Georgia once an agricultural exporting country of high quality products but that was was in another time, when the world was different.  A free trade agreement with regional producers who have basically the same climate and growing periods, even at international level, will put one country or another at a disadvantage.

It should be noted that Georgia has been a member of the World Trade Organization since 2001. The main problem is that it can never match the prices in the countries it wants to sell to without significant investment and technological development. In the short term, however,  the best short term option would to improve its efficiency over time so that it can better compete in its own domestic market, providing products which will replace imports, and then to looking to opportunities to export to niche markets.

With prices "going mad" Georgia should focus on increase of its agricultural production and creation of new jobs, including in tourism, President Saakashvili said on January 20.

"Under the current conditions, when we face a lot of challenges, including economic ones, when the prices have gone mad worldwide: price of fuel is increasing, price of food is increasing, prices of staple goods are increasing, the only way out of the situation, especially when we do not produce fuel, is to increase agricultural production in Georgia – that is why we bring here new seeds, new species; and secondly, we should develop, create new jobs so that they are able to buy these expensive products and tourism is one of the major means of employment," Saakashvili said.

Agriculture contributes less than 10% of country's GDP. Saakashvili said last November, that Georgia should boost agriculture's contribution to GDP to over 20% in next five years.

Saakashvili was speaking while visiting a new hotel in eastern Georgian town of Signagi; the hotel, owned by Temur Chkonia, who runs Georgian bottler of Coca-Cola products and whose company owns McDonald's franchise, was opened in a building previously housing local prosecutor's office.

"Previously the prosecutor's office was entering into businesses," Saakashvili said in reference to … and now private business is entering into the prosecutor's office, but, of course, for doing a business," Saakashvili said adding that Chkonia would also build a new hotel in Mestia, high-mountainous region of Svaneti.

Speaking at a government meeting in Mestia in December, Saakashvili called on businessmen "to open eyes" and to invest in construction of hotels in Svaneti, which, as Saakashvili said, would host at least 500,000 tourists annually in four years.


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