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ISET Economist Blog

A blog about economics in the South Caucasus.

Agriculture and Rural Development in Georgia: A Research Agenda

After many years on the back burner of policy discussion in Georgia, issues related to agriculture and rural development now seem to be at the forefront of debate. And for good reason, as these issues are incredibly complex and have important implications, not only for those residing in rural areas but also for those purchasing agricultural products in towns and cities.

Yet we still have much to learn about agriculture and rural development in Georgia and many questions remain, especially from a policy perspective. Are vouchers for those working in the agricultural sector the most appropriate way of reducing rural poverty or increasing agricultural productivity, for instance? Was the previously poor state of irrigation and drainage infrastructure across the country necessarily a binding constraint on productivity? How important is land registration for protecting individuals’ property rights or providing investment incentives? Has the state gone too far in some directions, potentially crowding out private investment in the process, or not far enough in others, and not providing an enabling institutional environment for small scale agricultural producers and agribusinesses? These questions have yet to be adequately addressed (or even asked), even though the economic and fiscal consequences are significant.

Most recently, there has been much discussion about agricultural cooperatives in Georgia. Over the last two years, we’ve seen a new law come into effect (the “Law of Georgia on Agricultural Cooperatives”) as well as the rollout of the European Neighborhood Program for Agriculture and Rural Development (ENPARD), which will seek to support the development of more than 100 business-oriented cooperatives and farmer groups across the country.

In case it’s thought that these initiatives represent the second iteration of the kolkhoz movement, note that the Law of Georgia on Agricultural Cooperatives explicitly states that the main (ideal) principles of agricultural cooperatives include voluntary membership, democratic management, and economic participation of members (shareholders), and that they should promote social responsibility, fairness and mutual assistance. It remains to be seen, of course, whether or how well these ideal principles will be maintained in practice, particularly with regard to management and share contributions and distribution of profits among members.

Nevertheless, as a legal entity, an agricultural cooperative can, in theory, play an important role in agricultural and rural development in Georgia by enabling farmers to come together to take advantage of various business opportunities. For example, service cooperatives may help improve product quality consistency, which is seemingly a major challenge in Georgia. Cooperatives may also help to improve economies of scale in input and product marketing among smallholder farmers, ease credit constraints, or improve access to market information. Lastly, in addition to their economic benefits, agricultural cooperatives may help support vulnerable individuals like internally displaced persons.

At the same time, many challenges in supporting agricultural cooperative development may arise. Chief among these challenges may be the difficulties faced by cooperatives in forming and sustaining market linkages, the role of trust and social capital within cooperatives and between cooperatives and other market players, cooperative governance, or market risks and constraints elsewhere (e.g., slow improvements in the land registry, political instability in Ukraine, etc.). There are also specific legal, tax, and charter-related issues that need to be addressed.


A RESEARCH AGENDA

It is with these questions and challenges in mind that we are launching a new research agenda about agriculture and rural development in Georgia, with primary emphasis on the contribution of agricultural cooperatives to key development outcomes. Our hope is that the knowledge produced through this research will be practically useful, both for policy formation and project implementation but also for thinking about how cooperatives are structured, their operations undertaken, and their market linkages developed. This research agenda is part of a new project with CARE International in the Caucasus and the Regional Development Association (RDA) under the European Neighborhood Program for Agriculture and Rural Development (ENPARD Georgia).

In order to ensure that our research and these discussions are evidence-based, we are currently conducting a baseline survey—in partnership with Georgian Opinion Research Business International (GORBI)—across the seven districts/municipalities in western Georgia (Chokhatauri, Lanchkhuti, and Ozurgeti in Guria, Abasha, Khobi, and Senaki in Samegrelo-Zemo Svaneti, and Tsageri in Racha-Lechkhumi and Kvemo Svaneti) of focus in this project. We will also be conducting qualitative research across these districts/municipalities beginning this summer, primarily in the form of a farmer diary questionnaire, but also by holding semi-structured interviews and focus groups with households primarily engaged in agricultural activities, and key informants across the project target region.

We will consider a wide range of topics related to agriculture and rural development, from legal and tax issues and the incentives faced by small-scale producers, to issues related to access to credit and the role of the Ministry of Agriculture’s preferential credit program for producers and processors. We will also examine issues directly related to cooperative formation, like charter development, market linkage formation, cooperative governance and management, and business plan development. Lastly, we will take a critical look at the efforts of our own consortium and other consortia under the ENPARD project.

Our goal is to bring some findings from micro-level data into discussions about agriculture and rural development in Georgia. That being said, any evidence base has its limitations, and should be critiqued accordingly. We hope you’ll find this research insightful and we invite your commentary and dialogue on this blog.


 

This article has been produced with the assistance of the European Union and CARE International in the Caucasus. The content of this article is the sole responsibility of ISET Policy Institute and can in no way be taken to reflect the views of the European Union or CARE International in the Caucasus. 

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Tuesday, 15 October 2019

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