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Georgian Minister of Agriculture – Mr. Davit Kirvalidze – The American Times
Every story has a theme. Fast action and a keen understanding of investor needs act as the theme which permeated The American Time’s cordial conversation with Georgia’s Minister of Agriculture, Mr. Davit Kirvalidze
The American Times: We understand your ministry has a very clear mission and role; what is that role?
Davit Kirvalidze: First, let’s talk about the role of the ministry today. We are here to act as the principal agent to the government to create an acceptable and progressive environment in which businesses can flourish in the Agriculture sector; with the acknowledgement that all sizes and types of businesses are equally important. We want companies to be as profitable as possible; they are the economic drivers delivering prosperity to the people and we will make sure there is deliberate legislation to achieve that end. Moreover, we have been listening to business owners and investor concerns and are adapting accordingly.
Our Government recognizes it needs to tone down its regulatory measures on businesses – which was not the case in previous years – it is now. We now see our role as a facilitator, a supporting hand, especially so in disadvantaged areas of our society. We recognize their need for personal and professional development; we are working towards developing that middle class of society that is indicative of more developed nations. Our hard-stance is simply this: Let Business Do Business. We are here to regulate as well as facilitate in the early stages.
We can promote Georgia through various media channels but that is not enough. Action and results are the best proof.
The American Times: What are some of the greatest challenges facing your sector today? And how do you see your close relationship with the US helping to overcome those challenges?
Davit Kirvalidze: We’ve had a lot of assistance from the US since our independence in 1992. Earlier on it was mostly humanitarian assistance, now we are in a position to absorb economic assistance for real development. The essence of this new assistance is not to maintain the status-quo through sustenance farming but to enable our farmers to engage in competitive production. We enjoy support from USAID and the Millennium Challenge Corporation that has, in no small part, allowed us to develop to the point where we can do just that. Because of this, we have some systems that are being established. These systems consist of; irrigation, drainage, extension service, and food safety. Our main goal is to make sure this system is implemented, fully functional and sustainable; ministers come and go but the system needs to stand the test of time.
The American Times: We’re glad you mentioned irrigation. We recently met with an agriculture investor who had some issues on a local level regarding irrigation as well as land ownership issues. Additionally, we recognized that there are some issues regarding obsolete technologies, absence of storage facilities and fragmented agro land. Which one of these challenges is the most urgent?
Davit Kirvalidze: All of these are extremely important. Irrigation concerns will be addressed actively from the recently established Agro Fund. But we need to start with titling; an issue needs to be over and finished immediately! To accomplish this we are working very closely with the Ministry of Justice, as they are the arm responsible for registration, to establish a comprehensive plan within 2013. In regards to obsolete technology, we are actively seeking to expedite the manner with more technology coming from the west; which is why we are working so diligently on making Georgia a country of unparalleled investment opportunities and incentives. The trade-off for the incentives is when those investors bring their technologies and know-how to propagate in our market, with storage facility capacities falling under technological advancements. But we must recognize that technology follows investment and investment follows not only concrete titling policies but addressing the issues of land fragmentation.Image may be NSFW.
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We currently have 3.5 million land parcels less than 1 hectare in size; this doesn’t lend to commercial development. There is only one solution to this: voluntary consolidation and cooperation with the smaller farmers. We set priorities and support these cooperatives. It is necessary to do so because there is no other way to make our land commercially viable and secondly, from an environmental perspective. With small plots there is no crop rotation which eventually leads to soil exhaustion and halted production. This simply does not lead to sound practices in farming. We will achieve de-fragmentation but not at the expense of free will. In Soviet times, it was compulsory for farmers to consolidate. What we need is a strong campaign explaining the benefits and opportunities that consolidation will bring to the farmer himself, personalize the process, not force it. Since currently over 50% of our population lives off sustenance farming, representing only 8% of GDP, we believe that they will respond well to this campaign when we take them from sustenance farmers to competitive cooperative members!
Georgia is a country of Boutique Farming options
In relation to the campaign for consolidation, we have a strong message to these farmers and international agro investors via a European Commission report conducted 2 years ago. The report revealed that 80% of the packaged food consumed here in Georgia is imported. That means that only 20% is sold locally even though we have the capacity to reverse that ratio. The reason is because local farmer fragmentation makes our products non-competitive; this is a strong story to convey and a true opportunity derived from a current challenge.
The American Times: Tell us more about the 1 billion GEL (≈ 600M USD) Agriculture Fund and how that directly addresses the irrigation infrastructure dilemma?
Davit Kirvalidze: In the last 22 years, since the collapse of the Soviet Union, agriculture has been deemed a priority; but only on paper. This Fund finally represents a tangible asset to that priority with a comprehensive plan for utilization backing it. An additional indicator of our seriousness can be seen in our new budget; it has increased over 60% from last year without a ceiling in place, in fact we expect more. These funds and budgetary increases are for the public’s good; with irrigation infrastructure being a main focus. These initiatives should be considered strong positive indicators to investors. To put this in perspective, our current irrigation infrastructure can provide for 280,000 hectares but currently has the capacity for a mere 24,000 hectares of irrigation. The system is in disrepair and needs immediate attention; especially since investors require strong infrastructure as a pre-requisite to investment. Therefore, we are acting without delay for remediation.
The American Times: What is the timeframe to complete the fixes?
Davit Kirvalidze: It will take 3-4 years, maybe less. A World Bank delegation will be here in February (2013) with a 50M USD project tabled and applied directly towards the irrigation challenge. There are also funds from the Dutch government and the International Fund for Agriculture Development (IFAD), which has already pledged 10M EUR. As you can see we are in a good capacity to reach our goals in an expedited manner.
The American Times: When people think of Georgia they think of great wine. What other areas offer substantial opportunities to investors and what incentives are available to them?
Davit Kirvalidze: Wine is the essence of Georgian Agriculture. However, our diverse topography is extraordinarily unique. Georgia is a country of Boutique Farming options because every region has its own specialty. As such, we do not offer only one major commodity for development. Tea and citruses grow especially well in the Guria and Adjara regions (SW Georgia); wheat in Kakheti region (Far East); corn in Imereti region (West Central),beekeeping, fisheries and so on. There are opportunities everywhere as long as the investor thinks deeply by following these peculiarities and knowing the market by diversifying their productions they are bound to have great success. On top of this, we believe that organic farming represents the future of this country; it represents a tremendous strength for us because there exists a worldwide niche market for organic products. These are the items unique to Georgia that we know make it attractive, and we recognize the need to make people more aware. We are confident that an investor would be hard-pressed not to see the potential when visiting Georgia.
The American Times: Please articulate a special message to our American investors.
Davit Kirvalidze: Based on this interesting interview I believe the principal message is that we know no one will invest or consider investing without coming here to see the country for themselves. We can promote Georgia through various media channels but that is not enough. Action and results are the best proof. We have great success stories playing out in real time and we expect more (Editor’s suggestion: see our “Success Stories” section). What I can say truthfully is that we really are committed to serving the investors. We will help support you within our given capacities. Through our partnerships with the USDA and other varying organizations we are currently developing a statistics agency. As such, we are ready to provide you with the wealth of information required to comfortably pursue investments here in Georgia. Without reliable information and extended support we recognize that investors cannot engage to their fullest potential. We understand investor needs and are acting accordingly to cater to those needs. Let us show you the proof; we are more than glad to host your investors here and offer them a nice glass of Georgian wine!