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Sunday, March 21, 2010

GEORGIAN AGRICULTURE STRUGGLES TO SURVIVE

We are in Georgia looking at agricultural development (see Note below). In the post-Soviet era agriculture in Georgia declined severely with people falling back on their own resources to survive in a much harsher market-oriented environment. With the dissolution of the large collective state-run farms, more than 2.3 million land titles were distributed. Most families have plots about one hectare in size, enough for self-sufficiency, but well below an economic scale for commercial agriculture. The situation has also been complicated by political problems such as the August 2008 war with Russia.

The wine growing industry is a case in point: Georgia produced most of the wine drunk in the Soviet Union. The quality was not all it might have been, but there was a large and regular market. The dispute over the South Ossetian territory changed that. Georgia now struggles to find a market for its wine, and the vineyards have limited financial resources for upkeep and re-planting.

The fact is that Georgia has a wonderful natural endowment for agriculture; the climate is good, rainfall and water supply plentiful in most parts, the soil is black and fertile. Georgians are hard-working, conservative people. But the rural population is ageing (36% of smallholding owners are over 65 years old) and it is hard to keep young people working on an essentially stagnant sector; self-sufficiency is the overall model, with only 18% of agriculture in the cash economy.

The collapse of the Soviet Union (admittedly now 20 years ago) meant that existing large-scale infrastructure was left to rot and a range of 'public goods' such as roads and main irrigation channels were not maintained. In general, but especially in the mountain areas (that comprise most of Georgia), access to services and markets is very limited.

But the real absence is one of finance. Interest rates are very high (over 25%) and agricultural land is not accepted as collateral. The point about a transition from a centralized, communist economy to a free-market, capitalist economy is that there should in fact be available capital! What is capitalism without capital? The answer is as any Georgian small holder will tell you, a desperate struggle to survive with what you have to hand.

This is not to say that we suggest a major transformation of agriculture in Georgia. There may be parts (e.g., along the central corridor, in the lowlands of the coast and in the east) where a commodity approach can be taken. But for the majority living in the fertile, Caucasian uplands, smallholding is a sustainable model. However it desperately needs support and the question we are trying to answer is how should that support might be delivered.

Note: Geoff Quartermaine Bastin is contracted by International Relief & Development (IRD) for this assignment. IRD is a major not-for-profit company and charitable institution based in Washington DC and has operated in Georgia for the last 10 years supporting various aspects of humanitarian relief and economic development activities. Check out http://www.ird.org/

Photo: vineyards in Central/East Georgia












1 comment:

Sarah said...

Great article. Very informative.

Well I guess the transition from a communist to a capitlist market comes with an initial downturn, but hopefully, in due time, Georgia will be able to overcome the obstacles and integrate its markets internally and with neighbours.

The good news is that it is naturally endowed with fertile land and lots of water, which are essential for agriculture.

And Geoff Bastin will fix the rest! :)