Irrigation Water Discussion: Inclusive Growth Dialogue at ISET Policy Institute

ISET Policy Institute on October 23 invited Simon to address representatives of government, NGO’s, industry and academia about issues related to irrigation water access in Georgia.

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The video of the dialogue is presented below. Simon’s commentary can be seen at 1.20 and 20.30

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Hvino News | Georgian Wine News: Georgia embraces tougher wine producing regulations

Unfortunately, the heavy hand of government once again falls on long-established industry practices that benefited both wineries and surrounding communities.

By banning sales of grape pomace (“chacha” in Georgian), the state is cutting off a useful source of revenue from wineries; sale of pomace to small village distillers who make their own chacha/aquavit/grappa from the pulp and sell it locally. No compensation is to be paid to such distillers as far as anyone knows.

Attempts to incorporate grape pomace in dairy cattle feed are now also to end as a result.

While poor quality wine made from pomace, or grape concentrate, or even jelly crystals has been an issue in the past in the Caucasus (both South and North), surely the principal of caveat emptor should prevail? It is arguable that this is only problematic if the product is fraudulently passed off as a premium branded product.  If low income people in the village are willing to pay for low-quality wine made from byproducts of vinification, and the end product is not unduly hazardous to health, then why interfere in normal market mechanisms?

29.10.2014. The Georgian government is taking a tougher stance on the country’s currently relaxed regulations on wine productions and making it illegal for wine producers to sell the grape pomace, a grape residue left after making wine.In particular, the wine producers will be obliged to use the pomace, according to today’s resolution of the Prime Minister.The government believed the new rules acted as a preventive measure that would further protect the wine sector and eliminate the production and distribution of low-quality wines.Chairman of the Agriculture Committee of the parliament of Georgia Giga Agulashvili believed there were occasions when pomace had been produced for secondary use. “Furthermore, it was resulting in adding sugar and water to the pomace and low quality of wine being produced,” Agulashvili said.The MP believed the resolution would encourage the production of pomace oil and use of pomace as a bio-fertilizer.

via Hvino News | Georgian Wine News: Georgia embraces tougher wine producing regulations.

Competitiveness of Georgian Agriculture: Investment Case Studies

We and ISET Policy Institute recently completed a series of eight case studies of commercial agribusinesses in Georgia, for the USAID-funded Economic Prosperity Initiative project. As some of you may know, Simon serves on the Policy Expert Committee of ISET-PI .The studies can be downloaded from here.

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Many of the case studies have been performed upon YFN Georgia’s clients’ enterprises, for which we are very grateful for their co-operation and trust. The basic structure of each case study is:

(a) Look at the business enabling environment in which these enterprises operate, and determine to what extent this helps or hinders their activities.

(b) Examine the impact the enterprises have, on such issues as unemployment, food security, tax revenue, training, and exports.

(c) Develop concrete recommendations for investors on how to reduce risks and improve chances of success based on the experiences of others.

(d) Develop concrete recommendations for government on how to attract and maintain foreign direct investment in Georgian agriculture, for mutual benefit of the investors, surrounding communities and the Georgian state.

A seminar will be held later this year at ISET to discuss the findings in a more interactive fashion. It is to be hoped that it will stimulate industry and government to celebrate successes, and reflect upon failures, for the benefit of Georgia’s rural sector.

Updates on Georgian Land Law

From today’s “Financial”. The article is well worth reading in its entirety.

A Georgian law which limits agro land acquisition by foreigners has angered many investors and forced them to change their plans in Georgia. LTD Jiveli, co-owned by Polish investors, is one of those companies and was planning to invest EUR 30 million in wine production. The company was denied the possibility to register purchase of the land. “Georgia is sending the message that it’s not open to foreign investment,” American businessmen told The FINANCIAL.

In Spring 2013, two Members of Parliament, Gigla Agulashvili, Chair of the Agricultural Issues Committee, and Zurab Tkemaladze, Chair of the Sector Economy and Economic Policy Committee, drafted a ban on all non-Georgian citizens (including Georgian entities with foreign minority shareholders – foreigners) from purchasing or inheriting agricultural land. The ban has been in effect since June 2013 and is planned to expire in December 2014. Prior to this decision, there were several minor protests made by Georgian farmers against foreign landowners.

The moratorium expired on 20 September but the Georgian Government added new restrictions for foreigners.

Foreigners can purchase agricultural land only if they have experience in agricultural activities in the country of at least 5 years. Individuals are also required to have a Georgian residential permit.

“We purchased 5,336 square meters in May in Telavi, in the Kakheti region. 50% of our company is owned by Polish investor Jurek Marian Berdz. We planned to develop wine-making. However, the Public Registry did not issue permission due to the participation of our foreign partner,” Avtandil Tcharbadze, owner of LTD Jiveli, told The FINANCIAL.

Avtandil owns 25% of the company, while the remaining 25% is owned by his father Zurab Tcharbadze.

“In the first stage the investor planned to make a EUR 1 million investment. The total volume of planned investments was EUR 30 million spread over the coming 5 years. Georgia is hardy saturated with investments of such a scale. If the jurisdiction hampers the inflow of this investment it will firstly impact on our economy,” said Tcharbadze.

Zurab Tcharbadze has been involved in business since 1992. In his words, it is the first time that he has faced such a problem. “Our foreign partner was ready to leave here,” he said.

“I have been cooperating with our Polish partner for four years. During this time I have been assuring him that the tourism and wine business is the most profitable in Georgia. We had hoped to export our products to the European market,” said Tcharbadze.

Tcharbadze does not plan to give up but instead plans to “fight to restore justice”. With the assistance of Transparency International Georgia the company has appealed to the Constitutional Court.

“How properly the Public Registry decided to link the 50% ownership by a foreigner as proof that it was an LTD registered by a foreign alien entity in Georgia – is really questionable,” said Oliko Shermadini, Assistant Lawyer at Transparency International Georgia.

In June 2014, the Constitutional Court upheld Transparency International Georgia’s constitutional appeal in the case of Mathias Huter vs. The Georgian Parliament. The Constitutional Court ruled the Georgian Parliament’s moratorium on the acquisition of agricultural land by foreign citizens until 31 December, 2014, to be unconstitutional as it contradicted Article 21 of the Georgian Constitution whereby the right of property and inheritance is recognized and inalienable and it is also prohibited to abolish the universal right of holding, acquiring, selling or inheriting property.