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Otar Shamugia: “We had over USD 200 million in growth [in agricultural produce export.]”

Verdict: FactCheck concludes that Otar Shamugia’s statement is HALF TRUE.

Resume: The total value of agri-food produce exported from Georgia in 2021 is USD 1,142 million whilst it was USD 942 million in 2020. As we see, the export of agri-food products has indeed increased by USD 200 million. Therefore, that part of Otar Shamugia’s statement is true.

In regard to the second part of the statement which concerns the diversification of the export market, the data of the last years show that the number of countries where Georgia’s agri-food was exported was the highest and reached 99. However, export markets increased by merely three units as compared to 2018 which is not indicative of any particular efficacy of the Ministry of Environmental Protection and Agriculture’s work in terms of export market diversification. In addition, the changes in the share of major export destination countries through years is more important as compared to the growth of the number of export destinations. Statistical data illustrate that Russia remains Georgia’s top trade partner and Russia’s share in agri-food produce export has been growing in the last four years with the exception of 2020 when Russia’s share shrank by one percentage point. This is yet another confirmation that Georgia was not particularly successful in market diversification and we are still massively dependent on the Russian market. Russia itself is an unreliable trade partner which often uses trade relations for political purposes. Therefore, Otar Shamugia’s statement is HALF TRUE.

Analysis

The Minister of Environmental Protection and Agriculture, Otar Shamugia, whilst speaking on agri-food produce exports to Russia highlighted the total export volume and stated: “We a had a substantial growth last year as agri-food produce exports increased over USD 200 million. The number of those countries where produce is exported is growing annually. This is also indicative of a robust diversification policy.”

The total value of agri-food produce exported from Georgia in 2021 is USD 1,142 million which is 21% more as compared to 2020’s figure. The major export items were: wine (21%), spirits (14%), mineral and drinking water (12%), nuts and fruit (mostly hazelnuts) and non-alcoholic sparkling drinks (5%).

Graph 1: Foreign Trade by Years (USD Million)

Source: Ministry of Environmental Protection and Agriculture

As illustrated by the graph, the export of agri-food produce in 2021 increased by 21% (USD 200 million), import increased by 12% and the negative trade balance decreased by 22% as compared to 2020. In 2021, Georgia’s agri-food produce was exported to 99 countries. The top export destinations for Georgia’s agricultural produce in 2021 are: Russia (USD 386 million), the EU (USD 180 million), Ukraine (USD 108 million), Azerbaijan (USD 108 million), Armenia (USD 88 million) and Belarus (USD 35 million).

Russia accounts for the bulk (34%) of Georgia’s total export of agricultural produce, followed by Ukraine (9%), Armenia (8%), Germany (4%), Belarus (3%), Italy (3%), Kazakhstan (3%), Lithuania (2%), China (2%), etc. In the reporting year, export to Russia increased by USD 98.8 million (34%) and reached USD 386 million. The list of products stipulating the growth of export is variegated but the biggest increase is found in mineral and drinking water, potatoes, non-alcoholic sparkling beverages and wine.

In 2021, Georgia exported agriculture produce worth USD 180 million to EU countries which is 14% (USD 22 million) more as compared to 2020’s figure. The share of EU member states in the total agricultural produce export constitutes 16% in 2021. The major export items are as follows: raw and processed hazelnuts (50%), wine (16%), spirits (12%), mineral and drinking water (11%).

As compared to 2020, the growth of the export of agricultural produce in 2021 is largely stipulated by increased exports of wine (21%), non-alcoholic sparkling beverages (5%), mineral and drinking water (12%), nuts and fruit (mostly hazelnuts – 10%), spirits (14%) and potatoes. As we see from these figures, the export of agri-food products in 2021 has indeed increased by USD 200 million as compared to 2020. Therefore, that part of Otar Shamugia’s statement is true.

In regard to the second part of the statement – about the diversification of markets – as mentioned earlier, Georgia’s agri-food produce was exported to 99 countries in 2021. In 2018, the number of export markets was 96, in 2019 it was 94 and in 2020 it was 92. It is clear that the number of export markets has been declining in the past few years since 2018 and only increased by three in 2021. This is not really indicative of the Ministry’s commendable efforts in terms market diversification. In addition, the changes in the share of major export destination countries through years is more important as compared to the growth of the number of export destinations. . For instance, if products are exported to 50 countries and the share of each of these countries is 2-2%, this will be a good example of a well-diversified market. However, if 90% of export products go to only two countries and the remaining 10% is distributed to another 98 countries, this would be an example of a poorly diversified market. Therefore, the Minister’s method which he employs to assess diversification is irrelevant, since it is more important to make export volumes more sizable vis-à-vis new markets in order to reduce a concentration of exports in any particular destination as opposed to adding a few new countries to the list of market destinations. And the only clear trend in this regard is Georgia’s growing dependence on Russia.

Table 1: Distribution of Georgia’s Agri-food Produce Exports by Countries

Source: Ministry of Environmental Protection and Agriculture

Statistical data illustrate that Russia’s share in agri-food produce export has been growing in the last years, except for 2020 when Russia’s share shrank slightly by one percentage point. According to the data of the last four years, export of agri-food produce to Russia increased by nine percentage points. In regard to EU member states, there was only a 1% growth for three years whilst the opposite happened last year and export decreased by one percentage point. The situation in the same vis-à-vis Ukraine. In all major trade partners, export is either slightly decreased or remains the same. Armenia is an exception here where exports increased by two percentage points last year. This is yet another confirmation that Georgia has not scored any particular success in terms of market diversification for years.

Based on the aforementioned statistical figures, Russia still remains Georgia’s top trade partner. However, as we have mentioned many times earlier, Russia is an unreliable trade partner and uses trade relations with different countries, including Georgia, for political purposes. Therefore, increased dependence on the Russian market is always risky. Therefore, FactCheck concludes that Otar Shamugia’s statement is HALF TRUE.


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