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THE CAUCASUS & GLOBALIZATION
Solomon PAVLIASHVILI
D.Sc. (Econ.), Professor, Dean of Tbilisi Academic University (Tbilisi, Georgia).
SUSTAINABLE DEVELOPMENT OF AGRICULTURE AND FOOD SECURITY IN GEORGIA
Abstract
This article examines the provision of food security as a mandatory condition of sustainable agricultural development in Georgia. It analyzes such issues as the increase in income in the agrofood sector and the decrease in poverty in the rural areas.
The author believes that the following prerequisites are mandatory for providing food security in the world: availability of stable financial institutions in the rural areas;
scientific support and extension (training and providing consultation for peasants (farmers), as well as establishing a reliable system for informing them); a developed food and social infrastructure; powerful market-oriented agrofood production; alternative non-agricultural jobs in the rural areas; a free domestic market protected from adulterated, contraband, and dumping products; effective public and private institutions; and active international cooperation.
KEYWORDS: food security, sustainable development, Georgia's agriculture, financial resources, adulterated and contraband products, agro-biodiversity.
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More than 90 percent of agricultural products are produced in the private sector, although privatization has led to the emergence of small businesses instead of large ones, a fragmented material and technical base, and industrialization of production.1
This privatization was carried out mechanically and it practically ruined the necessary infrastructure for agricultural production.2
Introduction
Most of the problems in the agrofood sector are directly related to the efficiency of the land market and land profitability. Launching a land market will help to enlarge the area of agricultural land, spread intensive agro technology, and increase the banks' interest in the sector.
The way the authorities provide information on external markets of agrofood production and international standards must be streamlined, which will help to improve sales opportunities and the issuing of bank loans for the processing sector in order to meet the demand of processing enterprises working with raw materials supplied by farmers. All of this will significantly accelerate rehabilitation of the processing industry, which could play an intermediate role between the financial institutions and the farmers.
Distribution of Regional Financial Resources
Several steps must be taken to ensure that stable financial institutions are available in the rural areas. In particular, extensive propaganda must be carried out among commercial banks, particularly those working according to micro financing schemes, in order to establish ties that are economically acceptable for peasants (farmers) and businessmen. The state, using the available scientific potential and in cooperation with donors, must help to raise the qualifications of bank employees with respect to agrofood risk assessment. In order to extend lending to businesses in the rural areas, the activity of micro financing institutions should be based on an analysis of market-oriented opportunities. It would be expedient if viable lending relations could be established.
Under the conditions of price disparity for agricultural machinery and agrofood products, renovation of the vehicle and tractor fleet is a slow process. Widespread leasing of production means and protection of the interests of leasing companies must be promoted by improving the corresponding legislation, and a well-organized system of technical service should be launched in all districts and territories of the country. Financing the leasing of agricultural equipment will be more advantageous for banks, due to the relatively lower risk, than issuing loans to purchase it.
In order to improve access to loans for the agroindustrial sector, an effective insurance system must be formed. The people making decisions about lending should make a correct assessment of the
1 See: S. Pavliashvili, The Phenomenon and Problems of Privatization, Tbilisi, 2009, p. 103 (in Georgian).
2 See: V. Papava, "On the First-Generation Post-Communist Reforms of Georgia's Economy (A Retrospective Analysis)," The Caucasus & Globalization, Vol. 5, Issue 3-4, 2011, p. 21.
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risk level and maintain substantiated economic activity tactics to ensure effective use of the branch's potential.
Tax policy should also be addressed when examining the financial resources of the agrofood sector. In this area, the current tax legislation must be simplified and an incentive-based environment created for businessmen that will ensure a boost in production and legalize businessmen as registered payers. It may be worth thinking about completely abolishing VAT in this area, which would help to eliminate land parceling and develop cooperation. Taxing small and medium businesses with a single consolidated tax would also be expedient. Due to the government's resource deficit, an effective tool for forming a market environment in the sector would be to use an incentive system. Tax rates in Georgia should be no higher than those in neighboring countries. And, finally, farmers should be regularly informed, by means of extension, about tax legislation issues.
The share of foreign direct investments in the agricultural sector is very low. In 2007, this index amounted to 0.8% of all FDI in Georgia, and in 2008, it was only 0.5%. In 2009, it rose to 3.4%, but in 2010, it fell to 1.1%. In 2011, the share of FDI in agriculture amounted to 1.3%, in 2012 to 1.8%, and in 2013, it fell again to 1.3%. This low index shows the high risks and low profitability in this sector.
Agriculture as an industry sector is, of course, less attractive for investors, since only communications and energy are highly profitable for them. Agriculture should be rendered state support in a way that makes every peasant (farmer) want to join this sphere. For example, such countries as Belgium, Norway, Austria, Canada, the U.S., and others directly finance agriculture from the budget in many cases, and this financing is quite significant. The European Union granted 60 million Euros in 2008 alone to support agriculture.3
In addition to improving the situation, the potential of Georgia's agrofood sector must be advertized in order to assist the inflow of investments into it. This will be a clear demonstration that the diversity of its natural resources, multivectoral agrofood sector, cheap workforce, professional personnel, and, most important, nearby voluminous sales markets are conducive to carrying out different kinds of business in the country.
Raising the Level of Farmers' Knowledge as the Main Factor in Bringing about Change
Training and providing consultation for peasants (farmers), as well as establishing a reliable system for informing them (extension) are of particular significance in the tough conditions of financing the market environment. Efforts must be stepped up to raise professional qualifications and retrain farmers, particularly young ones. In order to raise the effectiveness of agrarian education, intensive ties must be established with the leading educational institutions in the country and abroad, as well as with successful local farmers and businessmen.
Incorporating successful international experience that corresponds to our diverse reality is acquiring growing significance with respect to improving the material-technical base of the system and accumulating experience. Private structures also need assistance in this sphere. The accent should be placed on forming regional chains and supplying and fortifying them with a material-technical base. Recommendations should be drawn up regarding the problems, as well as proposals for publishing corresponding literature and for training and providing consultation for businessmen in the provinces.
' See: S. Pavliashvili, Zigzags of Inflation in Post-Soviet Georgia, Vol. 106, Akademiy Press, San Francisco, 2011.
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Keeping in mind world experience, consultations for consumers provided by corresponding services should be free at the initial stage. In order to raise the efficiency of the system, the maximum use must be made of the intellectual potential of scientific research institutions, higher educational institutions, colleges, and leading practitioners. Demonstrational consultations could be carried out at rehabilitation experimental stations of the Academy of Sciences, training departments of higher educational institutions, colleges, and successful private enterprises and farms.
The country should promote the formation of showcase farms of different profiles, as well as consultation by successful experienced farmers. At the same time, young farmers should been given the opportunity to take internships in the leading agricultural countries of the world and subsequently apply the experience they gain when they return home. The state should also assist in carrying out consultations for interested production goods merchants.
The Agrofood Industry and Alternative Jobs in Rural Areas
A developed production and social infrastructure is an important prerequisite for ensuring food security. The following measures should be carried out in this area: rehabilitation of the irrigation and drainage system; providing peasants (farmers) with agricultural machinery and high-quality pesticides, fertilizers, and vaccines; rehabilitation of nurseries of annual and perennial crops; restoration of animal-breeding activity in animal husbandry; and support of the private sector in the supply sphere.
The country should have a powerful, market-oriented agrofood industry. The development of the processing industry will promote integration, an increase in export resources, the creation of alternative jobs, and the availability of loans for farmers. When examining this component, we should also note the importance of lowering administrative barriers for trade, introducing international standards and certification, organizing exhibitions, fairs, and other support undertakings, and providing information on the market and its analysis.
Efforts should be aimed at developing non-profile agricultural production and social servicing, as well as material production, and releasing workers from agricultural production in order to provide them with alternative jobs. The state should try to create a favorable environment for developing small and medium business by means of legislative changes aimed at helping to create such jobs. The main emphasis should be placed on rapid rehabilitation of the processing industry. Small cooperative enterprises operating in the manufacture of canned fruit and vegetables, tomato and plum sauce, tea, wine, etc. could become successful. Along with creating small businesses in rural areas and increasing the economic efficiency of production, social issues can be addressed by creating additional non-agricultural jobs both directly at enterprises and in their service sphere.
The development of agro tourism will follow close on the heels of economic and political stability in the country. Georgia has all the prerequisites for this, such as its diverse natural conditions, hunting and fishing areas, lakes and rivers, excursion routes, interesting historical monuments, original and tasty cuisine, comfortable houses that can easily be made into family hotels, and so on. Small investments could help farmers (peasants) to receive and accommodate tourists at the level of normal everyday standards, as well as feed and entertain them, which would generate additional income for the population. Expanding folk craft would also be conducive to tourism.
Keeping in mind the natural-economic resources in Georgia, farm structures, their income, the mentality of manufacturers, as well as the selective policy regarding the country's transition to a market economy, a vital vector in the agrofood sector is forming different types of cooperatives and associations. It is worth noting that in the past two years, the Georgian Law on Agricultural Coop-
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eratives has been drawn up and come into force in the country. What is more, the European Neighborhood Program for Agricultural and Rural Development (ENPARD) has been launched in Georgia, within the framework of which support is rendered to the development of cooperatives and associations of farmers. In order to successfully develop this vector, an efficient agrarian policy of state support of agricultural and cooperative development must be drawn up, information based on an analysis of world experience on agricultural cooperation distributed and intensive explanatory work carried out, the country's intellectual resources, including those of the Academy of Agricultural Sciences and higher educational institutions, used for resolving cooperation problems, and barriers removed that hinder the development of joint agricultural scientific activity.
Protection from Adulterated and Contraband Products
The domestic market should be protected from adulterated, contraband, and dumping products. As a member of the WTO, Georgia should observe the domestic market protection rules established by this organization. At the same time, since locally manufactured products do not enjoy the same demand as subsidized products, the need has arisen to protect the local market. This can be done by means of customs duties coordinated with the WTO, simplified procedures regarding the use of seasonal duties, green box measures permitted by the WTO for supporting business in agriculture, a significant increase in the export potential of products, and, as a result, an improvement in the trade balance, an increase in product competitiveness as a result of introducing new technology, organizing the manufacture of environmentally pure products, strict adherence to the WTO obligations assumed regarding phytosanitary and veterinary security, and establishing a unified smooth-operating service of safe food and border control of agrofood production.
In 2014, an Association Agreement was signed with the European Union that makes the EU market promising for Georgia and institutes certain privileges with respect to the agricultural produce the country manufactures and exports. A legislative framework that corresponds to European standards is being created with respect to the manufacture of environmentally pure agricultural produce.
Against this background, as well as in the context of the intensified struggle against bio terrorism in the world, the authorities should restructure the veterinary and phytosanitary control services, as well as control over the quality of agricultural produce, including flour. A unified food security code that corresponds to European standards should be drawn up that will fully regulate food security and quality, as well as monitor the origin of products. In order to rid the market of low-quality products, a gradual transition to voluntary certification (which ensues from the WTO requirements) should be continued, the system for issuing certificates to private companies should be improved, control mechanisms over certified products should be established, and standards should be reexamined to ensure that they are in harmony with international and regional standards.
The government should step up control over the quality of local and imported products of plant and animal origin and quarantined pests, which requires gradual introduction of the Hazard Analysis and Critical Control Points system adopted by the FAO/WHO Codex Alimentarius Commission. This is a system of evaluation and control of hazardous factors of raw food, technological processes, and finished products called upon to ensure the high quality and security of food products. This will result in full-fledged monitoring of product quality from the farm to the consumer and step up efforts to identify adulterated products and their removal and destruction by the corresponding services.
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Preserving Agro-Bio Diversity
Georgia boasts diverse flora and flora that possess unique genetic properties, as well as aboriginal species distinguished by unique adaptation capabilities and resistance to disease. The state should encourage the creation of a register of genetic resources of agricultural plants and animals and assess their potential value, as well as ensure the protection of these resources during farming and improvement of the traditional methods of animal husbandry. The state is obligated to carry out effective measures to protect the soil from erosion, as well as improve the fertility of unfertile soil and prepare exploitation projects for raw stocks of those fertilizers that are not manufactured in Georgia. Demonstration plots should be created with the help of the extension service and the corresponding education of farmers promoted.
Sustainable development of the rural areas is closely tied to energy supply. Due to the many years of natural gas and electricity shortages in Georgia, the population has begun using wood, which has led to the improper felling of trees and destruction of shelter belts. Reduction in the area of shelter belts and wooded areas has led to rapid soil erosion and landslides. Degradation of the agro landscape and a drop in agricultural diversity is occurring. Creating new shelter belts is an efficient way to combat these phenomena. Government-targeted programs on soil-protection measures must also be prepared regularly. And, finally, the state should encourage the implementation of independent programs aimed at developing renewable sources of energy (water, wind, geothermal waters, and biogas) and raising the efficiency of their use.
Since the country has long refrained from using fertilizers and pesticides, favorable conditions have emerged for manufacturing biologically pure products. The government, along with corresponding departments, should create incentives for the organizers of bio farms in order to improve the infrastructure of the corresponding territories. This will also assist the development of agro and family tourism. A way to promote environmentally pure products, both in the local and international markets, should be elaborated. Keeping in mind all the above, it can be concluded that food security is a mul-tifaceted issue. It requires equal efforts and mutual support from the state, consumers, manufacturers, farmers, scientists, and researchers.
Conclusion
Ensuring food security is a challenge both for the public and private sectors. Many expected and unexpected problems can arise on the way to reforms, but viable levers are available for managing the possible complications. And it is extremely important that reforms be carried out in order to ensure food security. After all, this is aimed at providing consumers with high-quality food, creating a competitive environment, and assisting the expansion of the food industry and export. "In order to develop land, the demographic situation must be changed, and millions of people must be drawn to the rural areas. Life in the countryside should be comfortable and appealing, but in order to achieve this, the restoration of agriculture must not only be an economic, but also a priority social project."4
"A strategy must be determined for making a breakthrough in agricultural development. This requires preparing a long-term, calculated for a 5-7-year period, comprehensive program (strategy) of sustainable and safe development of Georgia's agricultural industry. The goal is to achieve maximum satisfaction of the growing needs of the population for food."5
4 See: L. Abalkin, "Agrarnaia tragediia Rossii," Voprosy ekonomiki, No. 9, 2009, p. 14.
5 See: N. Chitanava, "Strana nuzhdaetsia v novoi strategii razvitiia agrarnogo khoziaistva," Trudy Akademii ekonomi-cheskikh nauk Gruzii, 2012, p. 189.
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In order to reach these goals, political will, a comprehensive approach, a clearly developed action plan, and coordinated measures of the state, the private sector, consumers, and international organizations are needed. Jacques Diouf, former Director-General of the United Nations' Food and Agriculture Organization (FAO), had the following to say about food security: The FAO plays an enormous role in providing international food security. We think the position of the Committee on World Food Security must be strengthened, which should gather at the level of agricultural ministers and then increase its members by inviting not only the representatives of other international institutions, but also nongovernmental organizations, the private sector, and civil society to join it. The Committee should be endowed with powers to keep tabs on the situation in all aspects of international food security and, if necessary, make quick decisions.6
' See: "Jacques Diouf: Na planete golodaet kazhdy shestoi zhitel," Rossiiskaya gazeta—Federal issue, No. 4932 (108),
2009.
