Private investment in the agricultural sector is hampered by the long period of time required for returns on investment. The funds designed for investment in Georgia are therefore more likely go to other sectors. In addition, previous investment in crops now without an export market, such as wine and tea, have left assets which are destroyed only reluctantly, as there is still uncertainty over the future potential of such assets. Tea is instructive in this regard. Many experts would have little prospects for the export of Georgian tea given its poor quality. The recent surge in the world price, however, has even attracted the German Company, Martin Bauer to Georgia with the resulting investments already made. The focus of international financial institutions on Georgian agriculture is creating longer-term and cheaper credit systems for development of this sector. For example, with the resources accumulated as a result of the sale of wheat flour imported in 1994 and 1995 within the framework of the food aid programme of the European Union, the " Counterpart Fund" (CPF) was created and targeted for the development of agriculture. This fund (under the Tacis funded RARP1 project) was used to provide credit into the agricultural sector by utilising commercial banks as the conduit and recoverer of such credit. The project also set up credit unions, which provided loans to farmers. TACIS has recently created three regional agro-business training and consulting centres to help farmers and their associations adapt to the conditions in a market economy. Apart from this, the project pursued two goals: improvement of the food supply problem, and support of reforms. It has been so successful in Georgia that the methodology has been adapted as a model for other countries. A total of some GEL 37m in credits was issued to projects dealing with grain production, processing and trade. In January 1999 the EU held a tender to establish a new agricultural bank, which will eventually be run independently by Georgians. The World Bank allocated a USD 26m credit for a project to support the development of agriculture (21.08.97 - 30.04.02). It is planned to give USD 73m for irrigation and drainage, and USD 8.4m for agricultural research, education and extension. The Japanese Government has allocated Georgia grants to establish financial centres that will lease machinery to farmers. The lack of a comprehensive land register remains the fundamental obstacle to the development of a land market and the associated improvements in efficiency of land use. Projects funded by the World Bank and the International Fund for Agricultural Development are addressing this problem in some districts, but a great deal more money is needed to complete the task for the whole of Georgia. |
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 Project Supported by TACIS |
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