On 27 December 2013, on the air of the television company Rustavi 2, the Prime Minister of Georgia, Irakli Gharibashvili, spoke about the agricultural projects implemented by the government throughout the year 2013. As stated by the PM: “A total of 710 beneficiaries received assistance in the framework of the Agricultural Development Programme whose overall amount was around GEL 200 million. Furthermore, over 7,000 farmers were given preferential agro-credits with a total value of about GEL 205 million [...] two hundred hectares of land have been cultivated.”FactCheck
took interest in the facts outlined in the statement and set out to check their accuracy.In line with the 2013 Summary Report prepared by the Minister of Agriculture, Shalva Pipia, in the framework of the Preferential Agro-Credit Project loans with a total value of GEL 220 million were administered to 8,052 beneficiaries. Among these, funding was provided for the opening of 53 new enterprises.[i] FactCheck explored the subject of the financing of enterprises in a previous article
as well. With respect to this issue it has been established that the initial promise voiced by the Georgian Dream and, specifically, Bidzina Ivanishvili referred to the large enterprises (factories). Ivanishvili repeatedly stated that at least one such factory was to be opened in each region of Georgia. Later on, the promise of the provision of funding for the construction of large factories was modified and turned into the promise of funding for enterprises in general (large as well as small).As noted above, the enterprises were indeed financed, however, according to the information obtained by FactCheck,
the majority of the financed enterprises comprised small and medium-type enterprises. As was uncovered in the course of our research, only one of the already opened enterprises employs 70 persons (and even that is only in the season of delivering citrus fruit) while the rest employs a maximum of 40 persons.
Based upon the information published on the official website of the Ministry of Agriculture, after 2013 the Preferential Agro-Credit Project included the following three components:
- Interest-free loans for a period of six months (instalment) for small farmers – 0% interest rate up to GEL 5,000.
- Preferential agro-credits for medium and large farmers. Loans of GEL 100,000 are given out with an interest rate of no more than 8%.
- Preferential agro-credits for agricultural enterprises with the interest rate of no more than 3%. The minimal amount of a loan comprises USD 30,000 while the maximal – USD 600,000. The loans are issued for a period of 84 months.
- Preferential agro-leasing – funding for the equipment of the enterprises processing agricultural products. The maximal interest rate is defined at 3%, the maximal amount of the loan amounts to USD 600,000 and the loan is issued for a term of 84 months.
- Preferential agro-credits to wine producing companies – preferential loan for the sector of wine-making and vine-growing solely for the procurement of grapes.
- Preferential agro-credits for the companies exporting and processing citrus – the maximal amount of the loan is set at GEL 10 million and credit is issued for a period of four months.
Starting from 2014 a new component is added to the project which envisages the provision of agro-credits to companies operating in economically less active regions which process agricultural products. The loan is issued with the maximal period of 120 months and in the amount of USD 500,000, while the highest limit of interest rate is defined at 14%, 12% of which is covered by the Agricultural Project Management Agency.We also inquired about the expert’s evaluation of the Preferential Agro-Credit Project. As stated in the report Agriculture – Challenges and Current Policy,
crafted by the Economic Policy Research Centre (EPRC), at present, neither the banking sector nor the farmers proved to be duly prepared for the effective employment of financial instruments in the agricultural sector. In keeping with the report, the effective implementation of the programme demands the risk assessment for the individual projects of the programme with the participation of relevant field specialists. The preconditions are also to be specified for acquiring funding for the start-up projects. Furthermore, according to the spokespersons of the Economic Policy Research Centre, the Ministry of Agriculture has carried out no monitoring of the programme efficiency.
We also checked the accuracy of the part of Irakli Gharibashvili’s statement where the Prime Minister mentions the cultivation of 200 hectares of land. In agreement with the same report of the Minister of Agriculture, a total of 207.3 thousand hectares of land have been cultivated in the framework of the Supporting Land-Poor Farmers’ Spring Agricultural Work Programme. The programme provided direct assistance in the form of agricultural cards to 710 thousand farmers. A total of GEL 195.5 million was administered to the beneficiaries. In addition to the free-of-charge cultivation of land, with the nominal cards the land-poor farmers could purchase fertilisers, pesticides, seeds, agricultural equipment, veterinary medicines, etc.
In keeping with the position of the experts of the Economic Policy Research Centre, the majority of the land cultivated within the framework of the project belongs to the category of virgin soil owing to which a sharp upswing of agricultural production is expected in the first stage of the project. The said upturn will not yield a sustainable impact, however, as the fertility of the virgin land will, arguably, last only several years.
The report of the EPRC points to other flaws of the project as well. “In general, the implementation of such types of programmes cannot be effective; nor do they create prerequisites for longer-term growth of production. The reason of that, in our view, is an unconditional support to beneficiaries which lowers competition and may undermine the motivation of successful farmers. [..] We believe that the implementation of such programs must be stopped in the future and the needs of beneficiaries must be met in the context of general state social policy,” states the report.The projects implemented in the field of agriculture were characterised with various glitches as well. FactCheck previously conducted research on the Supporting Land-Poor Farmers’ Spring Agricultural Work Project in terms of the financial violations uncovered in the course of its implementation and the witnessed blunders in the distribution of vouchers.
In line with the official information of the Ministry of Agriculture, credits with a total value of GEL 220 million have been distributed to over 8,000 beneficiaries within the framework the Preferential Agro-Credit Project while the area of land cultivated in the context of the Supporting Land-Poor Farmers’ Spring Agricultural Work Programme reached 207.3 thousand hectares.
Some of the experts in the field of agriculture characterise the preferential agro-credits as well as the spring programmes as being rather socially oriented which undermine competition and, therefore, fail to be efficient in the long perspective. Furthermore, as asserted by the specialists of the EPRC, the Ministry of Agriculture carries out no efficiency monitoring on the programme. Nevertheless, the EPRC report refrains from making a final evaluation of the state policy in the field of agriculture as the final results of the programmes are yet to be delivered.FactCheck intends to study the outcomes of different completed or ongoing state agricultural programmes in the future as well. Based upon the facts available at this stage and bearing in mind various sorts of blunders uncovered throughout the implementation of the programme, FactCheck concludes that Irakli Gharibashvili’s statement: “A total of 710 beneficiaries received assistance in the framework of the Agricultural Development Programme whose overall amount was around GEL 200 million. Furthermore, over 7,000 farmers were given preferential agro-credits with a total value of about GEL 205 million [...] two hundred hectares of land have been cultivated,” is MOSTLY TRUE.
GeoStat defines an enterprise as an economic unit which produces goods or provides services and performs various sorts of activities. An enterprise can be an individual (physical) or a legal entity. According to the size, the enterprises are divided in the following manner. It is deemed to be large if the average number of employed in a year exceeds 100 people or the average yearly turnover is higher than GEL 1.5 million. An enterprise is considered to be medium if the number of its employees ranges from 20 to 100 in a year while the yearly turnover varies between GEL 0.5 million and GEL 1.5 million. The category of small enterprises encompasses organisations employing a yearly average of no more than 20 people and having an average yearly turnover of less than GEL 0.5 million.