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Journal number 1 ∘ Mariam Saghareishvili
Competition on Georgian Agricultural Market and Challenges in Agricultural Production

Expanded Summary

Agriculture has an important role[1] in development of the countries with transitional economies, such as Georgia. Notably, since 2012, Georgian government has recognized agricultural sector as one of their priorities[2]. Therefore, number of programs and projects are being implemented to support the sector by Agricultural Project’s Management Agency of the Ministry of Environmental Protection and Agriculture of Georgia[3]. The paper discusses competitiveness of Georgian agricultural products and tackles the main challenges hindering its increase.

In 2017, compared to the previous year, the share of agricultural sector in country’s total GDP declined by 0.8-percentage point and amounted to 8.2% (Geostat, 2018). In addition, in 2017 there was a negative real growth (-4.1%). The volume of agricultural production is increasing with moderate growth rate (2% increase in 2017, compared to 2016). However, the budget of the Ministry of Environmental Protection and Agriculture of Georgia increased and amounted to GEL 322 million, which is almost 4-times[4] higher, compared to its budget of 2011. 

According to Geostat, 43% of employed people are operating in this sector. This number amounts to 735 thousand person, from which 98%[5] are self-employed. Number of employed in business sector exceeds 12 thousand people. Productivity in the sector is not high. In 2017, on average, GEL 5329 was produced per worker (on average, GEL 444 per month), while in business sector, GEL 10920 – per person (GEL 909 per month). 

In order to achieve agricultural development, it is important to create and develop competition on agricultural markets. Competition on agricultural markets are beneficial[6] for both, consumers and producer, for the following reasons:

- It allows consumers to buy agricultural goods in relatively low prices. Competition results into lower prices, meaning that more people can afford and have access to specific agricultural products;

- Consumers are able to consume goods and services of higher quality. Firms try to improve the quality of goods and services in order to maintain competitiveness on the market;

- Consumers have wider and more diverse choice;

- Firms innovate to increase productivity;

- Firms become competitive on international markets as well as domestic ones.

Research of Georgian agricultural sector reveals low competitiveness of Georgian agricultural products on domestic and international markets. For instance, competitiveness of Georgian vegetables is hindered by international standards and requirements, which are not fulfilled by Georgian producers currently. In addition, the volume of vegetables produced in the country is relatively low, compared to the demand on vegetables in international markets (E. Kharaishvili, B. Gechbaia, G. Mamaladze, 2018).

Another factor that is hindering agricultural development in the country is the level of value chain developments in the sector. Research in this field[7] reveals lack of storage and processing enterprises, meaning that mainly primary goods are supplied to domestic and international markets with relatively low value compared to the processed goods. Therefore, high value added is not generated in the country due to production of primary goods.

Another important issue is access to finance for small and medium sized enterprises (SME). It hinders SMEs’ competitiveness on domestic and international markets (E. Kharaishvili, 2018).  Land fragmentation and land registration are also problematic issues[8] in the field. Land fragmentations hinders expansion of enterprises and their production. Land registration is one of the sensitive issues in context of access to finance, because land has low value for banks as a collateral.

For the countries with small economies, such as Georgia, it is difficult to produce large amount of agricultural goods and be competitive against the countries with big economies, such as Turkey. Therefore, it is important to develop niche products and become competitive in this direction. 

Georgia is limited in land, therefore, cooperation is the best decision to unite resources and to increase the volume of production, which will result into increased supply on domestic and international markets. This will increase competitiveness of Georgian agricultural products.

Introduction of international standards and requirements on domestic market will contribute development of the sector. It will improve the quality of goods and services and will make Georgian products more attractive for Georgian and foreign consumers. In addition, Georgian products of high quality will become accessible for Georgian consumers.

Introduction of new technologies and machinery is a way of increasing productivity. New technologies require financing; however, it increases competitiveness and gives an opportunity to producers to increase their profit.

Georgia has already signed free trade agreements with many partner countries. Such agreements are an opportunity to develop agricultural sector and increase its competitiveness. Free trade agreements promote competition on domestic markets and make international markets more accessible for Georgian producers. Through free trade agreements, there is a flow of international experience, innovations and knowledge about new technologies in the country and the main result is increased quality and competitiveness of Georgian agricultural products on domestic and international markets.

[2] Strategy for agricultural development in Georgia 2015-2020.

[3] Agricultural Project’s Management Agency, 2018.

[4] Ministry of Finance of Georgia, 2018.

[5] Strategy for agricultural development in Georgia 2015-2020.

[6] http://ec.europa.eu/competition/consumers/why_en.html

[7] Peach, mandarin, raspberry value chain analyses, PMC Research Center, 2018.

[8] https://waset.org/publications/10002878/problems-faced-by-the-agricultural-sector-and-agribusiness-development-strategy-in-georgia