On 21 February 2014, while delivering a speech at the plenary session of the Parliament of Georgia, the Chairman of the Agrarian Issues Committee, Gigla Agulashvili, discussed the 2013 harvest and wine export. Agulashvili stated that:  “The 2013 harvest was unique as we did not have to spend budget money. This is the most important of all. We purchased up to 16,000 tons of fresh grapes which is about 17% of the overall weight. Last year, you (United National Movement) purchased 34,000 tons (65%) of grapes with budget resources. This is the approach to the economy; this is the difference between your and our attitudes. Likewise, I spoke about the market diversification earlier; I can name the states that increased export of Georgian wine:  Ukraine, where the export increased by 7%, Kazakhstan, Poland, Belarus, England, Lithuania, Hong Kong, the Netherlands, Finland, Armenia, France and many more.”

FactCheck

took interest in Gigla Agulashvili’s statement and inquired about the accuracy of the abovementioned facts.

Based upon the information shared by the National Wine Agency, the main principles and directions of the 2013 harvest were defined by a Provision of the Government of Georgia, dated 20 August 2013. According to the abovementioned provision, the National Wine Agency was ordered to provide the following subsidies to wine companies:  GEL 0.4 for one kg of Mtsvane and Rkatsiteli and GEL 0.25 for one kg of Saperavi. The subsidies were given to the companies purchasing one kg of grapes for no less than GEL 1 from individuals (for comparison, in 2012, individuals selling grapes to wine producing companies were reimbursed the amount of GEL 0.25 for one kg of Rkatsiteli and GEL 0.35 for Saperavi). Different from the previous years, individuals owing vineyards of more than 10 ha were also subsidised in 2013. Additionally, wine producing companies benefited from soft loans determined by the state.

In Kakheti and Racha-Lechkhumi, wine making companies processed 92,773 tons of grapes. Of note is the fact that this is the highest indicator for the last 20-22 years (for comparison – in 2012, a total of 52,200 tons of grapes were processed).

It would also be useful to look deeper into the data of the 2012 harvest. According to the report on the state budget of 2012, the state allocated a total of GEL 47 million for supporting the 2012 harvest. The abovementioned amount included GEL 28 million for the purchase and processing of grapes as well as other respective measures. The subsidiary companies of the Georgian Rural Development Fund (LEPL) purchased and processed up to 35.5 tons of grapes with a total value of GEL 25.7 million.

In 2013 state enterprises purchased a total of 15.7 tons of grapes which comprises 16.6% of the overall amount of grapes purchased by wine producing companies. This indicator is much less than that of the previous years; however, this is good news as it means private companies bought most of the harvest. Based upon the summarising report of 2013 of the Ministry of Agriculture of Georgia, grapes were purchased by two state companies in 2013; namely, JSC Akura and GruzVinProm Bottles Ltd. JSC Akura purchased a total of 7,400 tons of grapes for GEL 7.4 million while GruzVinProm Bottles purchased 8,300 tons of grapes worth GEL 8.5 million. Thus, in 2013 state companies purchased grapes of a total value of GEL 15.9 million.

According to the summarising report of 2013 of the Ministry of Agriculture of Georgia:  “Due to the proper planning and supervision of the harvest process by the Ministry of Agriculture of Georgia and the National Wine Agency, competition between state and private companies was practically abolished. JSC Akura and GruzVinProm Bottles Ltd purchased grapes only from the zones out of the interest of the private sector based upon the origins of the raw material. Since there was a lack of Saperavi grapes, state companies processed only 255 tons of this variety. The abovementioned number comprises only 0.08% of the overall amount of Saperavi grapes.”

Therefore, state enterprises purchased 16.9% of the overall harvest. This indicator is much less than that of the previous year which in fact is a positive event as was already discussed above. The purchase of the grapes cost GEL 153.9 million which is also a rather low indicator (in 2012 state companies paid GEL 25.7 million for grapes). Nevertheless, Gigla Agulashvili’s statement is inaccurate about not spending any money from the state budget. The report on the state budget of 2013 says that a total of GEL 32,046.5 was allocated for the support of the harvest. However, the MP’s statement is relative as most probably he wanted to underline that the state spent much less money in 2013 for this purpose than in the previous years.

At the same time, of note is that Agulashvili is not quite accurate about the different approaches of the previous and current governments. The increased activity of private wine producers in 2013 is the result of the newly opened Russian market and the increased demand for wine and not of the different approach adopted by the new government.

FactCheck

also verified Gigla Agulashvili’s words about the increase of wine export in 2013. According to the summarising report of 2013 of the Wine National Agency, the wine export in January-November 2013 comprised a total of 41.6 million bottles which exceeds the same indicator of 2012 by 96%. It should be underlined here that the significant increase of the wine export is connected with the opened Russian market. In 2013 a total of 23 million bottles of wine were exported to Russia which comprises 55.3% of the overall wine export.

If we exclude the indicator of the wine export to Russia, wine export has increased by 3.2%. If compared to the respective period of the last year, export has increased to Ukraine (by 8%), Kazakhstan (2%), Belarus (8%), Poland (1%), Lithuania (7%), Great Britain (30%), Hong Kong (15%), the Netherlands (48%), Finland, France, Armenia, Japan, etc.

The income from Georgian wine export in January-November 2013 comprised USD 128.5 million which exceeds the indicator of the previous year by USD 63 million.

Conclusion

In 2013 state companies purchased 16.9% of the overall grapes sold to wine producing companies by individual farmers; this figure is significantly less than the similar indicator of 2012 (63%) as well as the previous years. This means that the share of private companies in the purchase has increased. In 2012 state companies spent a total of GEL 15.9 million on grapes which is lower than the same indicator of 2012 (GEL 25.7 million). According to the report on the state budget of 2013, a total of GEL 32,046.5 was allocated from the state budget for the support of the harvest. This indicator is also less than that of 2012 (GEL 47 million) but still shows that some money was spent from the state budget. Therefore, Gigla Agulashvili’s statement is incorrect in this respect. Despite this fact, it should be admitted here that this part of the MP’s statement is somewhat relative as, most probably, he wanted to underline that the current government spent less money than the previous one.

It is also noteworthy that Agulashvili is wrong about the different policies of the current and the previous governments as the increased activities of the private sector in 2013 are due to the newly opened Russian market and increased demand for wine than any different policies.

Gigla Agulashvili is right when speaking about the increased wine export in 2013. In addition, of note is the fact that in 2013 a total of 23 million bottles were exported from Georgia to Russia comprising 55.3% of the overall wine export. If taking into account the wine export to Russia, the indicator increased by 96% in 2013 while this number equals 3.2% without considering the export to the Russian market.

Based upon the aforementioned data, FactCheck concludes that Gigla Agulashvili’s statement: “The 2013 harvest was unique as we did not have to spend budget money. This is the most important of all. We purchased up to 16,000 tons of fresh grapes which is about 17% of the overall weight. Last year, you (United National Movement) purchased 34,000 tons (65%) of grapes with budget resources. This is the approach to the economy; this is the difference between your and our attitudes. Likewise, I spoke about the market diversification earlier; I can name the states that increased export of Georgian wine:  Ukraine, where the export increased by 7%, Kazakhstan, Poland, Belarus, England, Lithuania, Hong Kong, the Netherlands, Finland, Armenia, France and many more,” is Half TRUE.

Originally published in The Financial, issue N. 19(399)