ISET

ISET Economist Blog

A blog about economics in the South Caucasus.

Should Georgia Sell its Agricultural Lands to Foreigners?


A BIT OF HISTORY:

THE GOOD…

Until 2012, Georgia has been encouraging foreigners to purchase land, bring modern technology and management to the country’s ailing agricultural sector. On the one hand, Georgia’s extremely liberal approach was a boon for investment by global food industry giants such as Ferrero (4,000ha hazelnut plantation in Samegrelo) and Hipps (growing of organic apple and production of aroma and apple concentrate in Shida Kartli). On the other, it catalyzed the creation of joint ventures in agricultural production and food processing which quickly assumed leadership in their respective market segments. Examples of the latter are:  

    • Chateau Mukhrani (pioneering a business model combining grape growing, boutique winery and hospitality services)
    • Nergeta (“discovering” Georgia’s great potential as a kiwi producer) and
    • Imereti Greenery (a 4,000m2 hydroponic greenhouse fully substituting for Georgia’s imports of lettuce).

THE BAD???

Somewhat more controversial was the arrival of foreign farmers who settled in the midst of Georgian village communities. The South African Boers were among the first to receive a warm welcome (and citizenships) in 2010; as a result, about a dozen of Boer families set up farms in Sartichala and Gardabani. In 2010-2012, Georgia’s openness also triggered migration by a few scores of Panjabi families, who bought agricultural land in Kakheti, Kvemo Kartli and other regions. Towards the end of Saakashvili’s rule, in 2011-2012, Georgia became an investment target for farming enterprises from the politically and economically troubled Iran and Egypt.

THE UGLY!

While good for the economy, the arrival of foreign farmers sparked popular protests across the entire country. The root cause of trouble in practically all cases was the hasty repurposing and privatization of pasture and agricultural lands around Georgian villages.

One issue was (and still is) incomplete land registration. For example, about one third of Ferrero’s 4000ha landed properties was found to be owned or physically occupied by Megrelian farmers. In this particular case, a complicated compromise involving land swaps and compensation for affected smallholders was brokered by the Georgian government. Many other, less prominent and easier-to-ignore cases are still awaiting their resolution, feeding mutual hostility and simmering conflicts.

Second, regardless of registration status, privatization of pasture lands surrounding Georgian villages is an extremely sensitive matter. The arrival of new investors, whether foreign or domestic, reduces the amount of “free” pasture land available for the local communities. Conflicts arise the moment new investors attempt to fence and cultivate their newly acquired properties.

In most documented cases, investors were able to accommodate villagers’ demands by hiring the main troublemakers (e.g. as security personnel), renovating churches, schools and roads, or by providing free machinery services, seed and training. In a number of instances, however, negotiations failed and an open conflict broke out.

Under the UNM rule, such conflicts were typically repressed through agile police and local government action. Protesters guilty of violating private property rights were arrested; some jailed. The situation changed in 2012 following the Georgian Dream coalition’s rise to power. Amplified by media, the calls to stop the “foreign invasion” produced a policy shift. Police force would no longer be deployed to suppress protests and repel property invasions, effectively allowing some of the local communities to squat on investor-owned land.

In June 2013, foreign investment in Georgia’s agriculture was put on hold with the introduction of a temporary one-year moratorium on the acquisition of agricultural land by foreigners. Foreign investors and any businesses with foreign shareholders, including banks, were no longer able to come into possession of agricultural land, or use it as collateral. The moratorium was lifted a year later, following a legal challenge by Transparency International. Yet, to date, transactions involving agricultural land are not registered by the Public Registry pending new legislation.


THE NEW LAW: A REASONABLE COMPROMISE OR “A PLAGUE ON BOTH YOUR HOUSES”

The new law, currently reviewed by the Georgian Parliament’s agricultural committee, attempts to strike the balance between the country’s hunger for foreign investment and agricultural expertise, on the one hand, and the need to protect the livelihoods of Georgian peasant communities, on the other. But does it achieve either one of these objectives?

There was a consensus among all speakers in the debate, organized on February 13 by the ISET Policy Institute and USAID’s G4G project, that the first objective of the new law should be to facilitate foreign (and domestic) investment in Georgia’s agriculture. The benefits of foreign presence in Georgia’s agriculture go way beyond capital investment. Foreigners and foreign businesses are a vital source of technological and management knowhow, catalyst of innovation, skill upgrading, and a bridge to foreign markets. This view was shared by all speakers, including Gigla Agulashvili, Head of the Agrarian Committee of the Parliament of Georgia, and Davit Galegashvili, Deputy Minister of Agriculture.

Likewise, there was little disagreement among the panelists about the need to provide some degree of protection (or compensation) for Georgian village communities, whose livelihoods may depend on access to state-owned pasture land. This position was clearly formulated by Lasha Tughushi, Chief Editor of Rezonansi and DFWatch. Another important concern, from Tughushi’s point of view, should be to ensure Georgian ownership of land in sensitive border areas.

The draft law, in its current formulation, does indeed ban foreign ownership of agricultural land in proximity to Georgia’s state border. However, it does little to protect the livelihoods of local communities other than by imposing quantitative restrictions on the amount of land foreign individuals and companies are allowed to buy. Accordingly, the draft law allows foreign physical persons (holding permanent or temporary residence permits) to purchase land in the 5-20ha range. The range for legal entities wholly or partially owned by foreign citizens (or a foreign owned legal entity) is set at 20 to 200ha.


BETWEEN THE SCYLLA OF MEGA-FARMS

The ceilings of 20 and 200ha for physical and legal persons, respectively, have been explained and defended by Deputy Minister Galegashvili, who argued that Georgia’s agriculture must be allowed a “grace period” of several years during which it could develop and build muscle before allowing foreigners to freely acquire agricultural land. He referenced the decision by Poland, Romania, Bulgaria and the Baltic States to ban foreigners from buying agricultural land during 10 years after joining the EU. Georgia is willing to move faster, but it should not rush. Otherwise, claimed Galegashvili, there is a danger that foreign owned mega-farms will displace less productive Georgian farmers, destroying the traditional Georgian way of life, fueling mass unemployment and homelessness.

This point was contested by other panelists. In particular, Jacques Fleury (former CEO of Borjomi, Chateau Mukhrani and GWS) argued that in order to promote Georgian wines to new markets, such as the EU, the sector is in need of strong leaders that would take upon themselves to invest in the branding and international marketing of Georgia as a cradle of wine civilization, etc. All other companies operating in the sector, irrespective of their size, would be able to take a free ride on this investment by the large, foreign owned businesses. No medium size wine business, operating on a few hundreds of hectares, would be able to undertake the necessary investment, according to Fleury.

Fady Asly, representing the International Chamber of Commerce, further suggested that the new law should allow the sales of state-owned agricultural lands. Large foreign companies would be in any case reluctant to consolidate a myriad of small plots owned by Georgian farmers. Rather, they would engage smallholders in their supply chains. And as far as state-owned lands are concerned, quantitative restrictions are merely a drag on business development.

Perhaps clinching the argument, Gigla Agulashvili argued that, while perhaps effective in limiting the sales of agricultural land to physical persons, the 200ha ceiling would not stop foreign-owned businesses from acquiring much larger plots. They would do so by setting up daughter companies and engaging in complicated corporate acrobatics. Thus, rather than providing any protection to Georgian smallholders, the ceiling would generate extra work for corporate lawyers.


AND CHARYBDIS OF INDIAN SUBSISTENCE FARMERS

Another purpose of the new law, according to Lasha Tughushi, should be to prevent the arrival of small “subsistence” farmers from other countries. The best way to do so, in his opinion, would be to prohibit the sales of very small plots of land to foreigners. A foreign “investor” interested in buying, say, only 1 or 2 hectares of land, argued Tughushi, is very unlikely to be “business-oriented”. By setting up a relatively high floor on the amount of land a foreigner could buy (the draft law proposes to set this floor at 5ha), the government would filter out subsistence farmers from India and other overpopulated countries.

Tughushi’s suggestion was not very well received by other panel participants. First, as convincingly argued Dirk Aleven, modern agriculture does not require large plots of land. The business he represents, Samtredia-based Imereti Greenery, invested more than 5mln GEL in a hydroponic greenhouse on a single hectare of land, substituting for Georgia’s entire imports of lettuce, and creating more than 20 jobs. Instead of “filtering out” Indian subsistence farmers, the floor of 20ha would make it prohibitively expensive for businesses such as Imereti Greenery to enter the Georgian market. At the same time, there may be other ways to prevent speculation in land and encourage investment in capital-intensive agriculture. The simplest way would be to condition the sale of land by a minimum amount of investment, a minimum volume of sales, or jobs created.

Simon Appleby (YFN-Georgia) added that plot size alone is not an adequate criterion for judging the nature of investment. If at all, restrictions should be formulated in terms of the value of land, which may differ a lot depending on location, climate conditions, and access to infrastructure.

Finally, restrictive (and targeted) visa and immigration policies might be much more effective and efficient tools for preventing emigration by Indian smallholder farmers, argued Sascha Ternes (former CEO of ProCredit Bank and Agron), if, indeed, this is the motivation behind the minimum threshold requirements in the new draft law.


AND WHAT ABOUT CONSTITUTIONALITY?

There is still hope that the draft would be improved in the process of committee review in the Georgian parliament. Among other changes, it will be crucial to remove or amend those provisions in the law that do not adhere to Georgia’s constitutional norms. A case in point, argued Eka Bokuchava (Transparency International-Georgia) is the requirement that foreigners (physical persons) dispose of their landed property within 6 months of divorcing their Georgian spouses or failing to extend their residency permits. This clause in the law opens the door for expropriation of landed property by administrative fiat, posing severe corruption risks and subjecting foreigner investors to undue pressures. Bokuchava went as far as to state TI-Georgia’s resolve to challenge this provision in Georgia’s constitutional court. 

*     *     *

However imperfect, the new draft law serves one important purpose – to provide the legal basis for resuming transactions in the Georgian agricultural land market. This in itself is a great step forward and should not be underestimated. Moreover, the law recognizes the special status of foreign-owned banking and microfinance institutions, allowing them to use land (without any quantitative restrictions) as collateral in lending to the agricultural sector. Yet, it is also clear that some of the key provisions in the law are not grounded in Georgia’s economic realities. Rather, they represent a political manifesto stating the government’s commitment to protecting the interests of Georgian smallholder farmers. Unfortunately, there is very little in the law to provide Georgian smallholders with real protection against abuse in the process of land privatization.

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Guest - megiddo02 on Tuesday, 24 February 2015 15:24

1) What is so terrible about Indian smallholder farmers? Perhaps they do not have a great impact on the economic development of Georgia, but I am wondering whether their possible immigration is such an important issue that one has to keep them out by specific legal regulations. In the end, compared to other countries, there are not that many foreigners in Georgia, and I do not see the harm caused by some Indian smallholders settling in Georgian village communities. To the contrary, this can give positive cultural impulses to those local communities.

I also do not think that those people are "subsistence farmers". If you are really a subsistence farmer in India, you lack the financial resources as well as the mental and social flexibility to move to a country thousands of kilometers away and set up a farm there. Calling these people that way already sounds like xenophobe propaganda.

Moreover, preventing small plots of land to be sold to foreigners reduces the value of those plots, harming their current owners. This regulation is against the interests of Georgian smallholder farmers, who get deprived of the option to sell their plots to foreigners.

I am also surprised that, according to the article, the populist and not very enlightened demand to "keep Indian smallholders out of Georgia" has come from a representative of the civil society/NGO sector.

2) Did nobody speak about a genuine land reform? In Eastern Germany, after the fall of the socialist system, they carried out a land reform. Unlike in Georgia, where lots of land is not officially owned by anybody, the land in Eastern Germany was owned by entities and persons under the socialist system. The entities wich were typically privatized very soon. To remove uncertainty for investors, a clear rule was adopted: the land was given to those entities and persons that owned the land under socialism, and if there was a claim made by previous owners (who owned the land before 1948), there would be monetary compensation paid by the government. In this way, uncertainty was removed quickly and the investment climate improved.

In Georgia, as there is truly unregistered land, the issue is more complicated. However, there are ways to assign the land to villagers in reasonable ways, drawing on research on the famous "cake sharing problem" in game theory (http://en.wikipedia.org/wiki/Fair_division). With just two agents, the solution is easy: the first agent shares the cake, the second can then choose one of the two parts. For a village, with the surrounding land being the cake, generalizations for N agents are called for, which exist in the literature.

The cleanest solution would be to carry out a genuine land reform very quickly, i.e. within one year from now, and then remove any restrictions of land ownership for foreigners or anybody else.

This would be a something where the new government could show that it is capable of delivering sound solutions instead of constantly implementing bad economic ideas.

1) What is so terrible about Indian smallholder farmers? Perhaps they do not have a great impact on the economic development of Georgia, but I am wondering whether their possible immigration is such an important issue that one has to keep them out by specific legal regulations. In the end, compared to other countries, there are not that many foreigners in Georgia, and I do not see the harm caused by some Indian smallholders settling in Georgian village communities. To the contrary, this can give positive cultural impulses to those local communities. I also do not think that those people are "subsistence farmers". If you are really a subsistence farmer in India, you lack the financial resources as well as the mental and social flexibility to move to a country thousands of kilometers away and set up a farm there. Calling these people that way already sounds like xenophobe propaganda. Moreover, preventing small plots of land to be sold to foreigners reduces the value of those plots, harming their current owners. This regulation is against the interests of Georgian smallholder farmers, who get deprived of the option to sell their plots to foreigners. I am also surprised that, according to the article, the populist and not very enlightened demand to "keep Indian smallholders out of Georgia" has come from a representative of the civil society/NGO sector. 2) Did nobody speak about a genuine land reform? In Eastern Germany, after the fall of the socialist system, they carried out a land reform. Unlike in Georgia, where lots of land is not officially owned by anybody, the land in Eastern Germany was owned by entities and persons under the socialist system. The entities wich were typically privatized very soon. To remove uncertainty for investors, a clear rule was adopted: the land was given to those entities and persons that owned the land under socialism, and if there was a claim made by previous owners (who owned the land before 1948), there would be monetary compensation paid by the government. In this way, uncertainty was removed quickly and the investment climate improved. In Georgia, as there is truly unregistered land, the issue is more complicated. However, there are ways to assign the land to villagers in reasonable ways, drawing on research on the famous "cake sharing problem" in game theory (http://en.wikipedia.org/wiki/Fair_division). With just two agents, the solution is easy: the first agent shares the cake, the second can then choose one of the two parts. For a village, with the surrounding land being the cake, generalizations for N agents are called for, which exist in the literature. The cleanest solution would be to carry out a genuine land reform very quickly, i.e. within one year from now, and then remove any restrictions of land ownership for foreigners or anybody else. This would be a something where the new government could show that it is capable of delivering sound solutions instead of constantly implementing bad economic ideas.
Guest - Eric Livny on Tuesday, 24 February 2015 15:42

There is nothing wrong about Indian farmers, except for the fear of massive immigration from one of the most populous countries in the world. A fear that is, of course, exaggerated by media. As George Welton indicated, the actual number of foreigners in Georgia is very low, and the % of agricultural land they own is also quite small (he gave a specific number which I don't remember).

Another useful comment, made by Sascha Ternes, was that there are other policy tools to regulate migration, namely visa and migration rules. If the purpose is to keep Indian smallholders (agree, not subsistence farmers) out of Georgia, the naturalization law should say that land ownership does not entitle to citizenship or even residency.

Georgia had its land reform in the early 1990s, giving every villager something like 1.25ha. Nobody is demanding restitution, so the East German problem did not arise here.

One problem with this reform is that it left a lot of pasture lands in formal state property. There is no such thing in Georgia as "communal property" even though many of these lands former Sovkhoz or Kolkhoz areas surrounding villages, and locals are using them as free pasture. When an investor comes in and privatizes a plot (of whatever size), it reduces the amount of free pasture that is available to locals (and which they consider to be historically their own). Hence, a zero-sum game situation which some investors learned how to transform into a win-win, and other have not.

There is nothing wrong about Indian farmers, except for the fear of massive immigration from one of the most populous countries in the world. A fear that is, of course, exaggerated by media. As George Welton indicated, the actual number of foreigners in Georgia is very low, and the % of agricultural land they own is also quite small (he gave a specific number which I don't remember). Another useful comment, made by Sascha Ternes, was that there are other policy tools to regulate migration, namely visa and migration rules. If the purpose is to keep Indian smallholders (agree, not subsistence farmers) out of Georgia, the naturalization law should say that land ownership does not entitle to citizenship or even residency. Georgia had its land reform in the early 1990s, giving every villager something like 1.25ha. Nobody is demanding restitution, so the East German problem did not arise here. One problem with this reform is that it left a lot of pasture lands in formal state property. There is no such thing in Georgia as "communal property" even though many of these lands former Sovkhoz or Kolkhoz areas surrounding villages, and locals are using them as free pasture. When an investor comes in and privatizes a plot (of whatever size), it reduces the amount of free pasture that is available to locals (and which they consider to be historically their own). Hence, a zero-sum game situation which some investors learned how to transform into a win-win, and other have not.
Guest - megiddo02 on Tuesday, 24 February 2015 17:36

Interesting, didn't know that they had a land reform. One could still argue that if there is so much land left, why not giving it to the people? Everybody knows that it is economically disastrous to let this land be "commons" of the villagers and not assign property rights (the well-known "Tragedy of the Commons").

Interesting, didn't know that they had a land reform. One could still argue that if there is so much land left, why not giving it to the people? Everybody knows that it is economically disastrous to let this land be "commons" of the villagers and not assign property rights (the well-known "Tragedy of the Commons").
Guest - ia on Tuesday, 24 February 2015 18:22

According to informal sources, foreign citizens own 18,500 hectares of agricultural land, which is about 0.7 % of the country’s total agricultural land. Although the share of 0.7% is quite small (http://www.transparency.ge/en/blog/ban-land-sales-stories-large-foreign-farmers), there are examples of some land transactions which pose particular risks on Georgia’s territorial unity.

One of the examples is the purchase of land by Indians in 2013 in the village “Ditsi” which is close to Gori and South Ossetia conflict zone. Locals did not allow investors to process the land because of their concerns regarding border zone ( https://www.youtube.com/watch?v=GwrI9-Bywno).

Another interesting example is again related to Indians and some speculative activities related to the resale of Georgian land by them. In 2011-2012 due to extremely cheap prices (prices of 0.05 – 0.07 GEL per m2 circulated in media, source: http://www.geworld.ge/View.php?ArtId=6206) a sale of 1 ha of land in India could allow the investor to purchase up to 100 ha land in Georgia. Since state owned land was usually sold in big lots, Georgian farmers in most cases could not afford total amount required for the purchase.

According to informal sources, foreign citizens own 18,500 hectares of agricultural land, which is about 0.7 % of the country’s total agricultural land. Although the share of 0.7% is quite small (http://www.transparency.ge/en/blog/ban-land-sales-stories-large-foreign-farmers), there are examples of some land transactions which pose particular risks on Georgia’s territorial unity. One of the examples is the purchase of land by Indians in 2013 in the village “Ditsi” which is close to Gori and South Ossetia conflict zone. Locals did not allow investors to process the land because of their concerns regarding border zone ( https://www.youtube.com/watch?v=GwrI9-Bywno). Another interesting example is again related to Indians and some speculative activities related to the resale of Georgian land by them. In 2011-2012 due to extremely cheap prices (prices of 0.05 – 0.07 GEL per m2 circulated in media, source: http://www.geworld.ge/View.php?ArtId=6206) a sale of 1 ha of land in India could allow the investor to purchase up to 100 ha land in Georgia. Since state owned land was usually sold in big lots, Georgian farmers in most cases could not afford total amount required for the purchase.
Guest - megiddo02 on Tuesday, 24 February 2015 19:01

Very interesting, Ia.

Don't see, however, why Indians buying Georgian lands, even close to the border, endangers Georgian territorial unity. The TI article which you link is very critical about the GD government's reservations with regard to Indian farmers.

Your last point in my opinion does not call for a ban on foreign land purchases, but for charging reasonable land prices.

Very interesting, Ia. Don't see, however, why Indians buying Georgian lands, even close to the border, endangers Georgian territorial unity. The TI article which you link is very critical about the GD government's reservations with regard to Indian farmers. Your last point in my opinion does not call for a ban on foreign land purchases, but for charging reasonable land prices.
Guest - Salome on Thursday, 26 February 2015 22:09

I think that, restriction about border zones might be explained by the fact that Georgia has an experience with the Northern neighbor distributing passports to people living in Georgia's border zones and then "protecting" the interest of "those new" citizens (the rest of the story is well known not only by Georgia). That's why it might be wiser to leave border zones in the ownership of Georgians. So this might be an argument behind this restriction.

As to article citation, it was cited just as a source for figures mentioned in the comment, but not for its content.

Reasonable prices... That's definitely important point. If price is higher than those 0.05-0.07 GEL and amount of land sold by the state is big (and usually it was quite big) then land becomes even less affordable for Georgian farmers because total investment required becomes too high. Low price on the other hand, gives possibility for speculative transactions by foreigners and not only foreigners, and this transactions hardly contribute to the economy of the country. So taking all this into account charging reasonable price and deciding what this reasonable price is, seems to be quite difficult task. Maybe several farmers should agree and buy land together if one household cannot afford it. This might be one of the possible ways to go.

I think that, restriction about border zones might be explained by the fact that Georgia has an experience with the Northern neighbor distributing passports to people living in Georgia's border zones and then "protecting" the interest of "those new" citizens (the rest of the story is well known not only by Georgia). That's why it might be wiser to leave border zones in the ownership of Georgians. So this might be an argument behind this restriction. As to article citation, it was cited just as a source for figures mentioned in the comment, but not for its content. Reasonable prices... That's definitely important point. If price is higher than those 0.05-0.07 GEL and amount of land sold by the state is big (and usually it was quite big) then land becomes even less affordable for Georgian farmers because total investment required becomes too high. Low price on the other hand, gives possibility for speculative transactions by foreigners and not only foreigners, and this transactions hardly contribute to the economy of the country. So taking all this into account charging reasonable price and deciding what this reasonable price is, seems to be quite difficult task. Maybe several farmers should agree and buy land together if one household cannot afford it. This might be one of the possible ways to go.
Guest - megiddo02 on Friday, 27 February 2015 09:28

Yes, the solution would have been (and may be in future) to give the land to Georgian farmers for free. If the revenue was just 5 tetri per square meter, that would really have been much better. This anecdote just shows how bad governments perform, in this case the government run by the UNM, if they sell their land for 5 tetri per square meter.

Yes, the solution would have been (and may be in future) to give the land to Georgian farmers for free. If the revenue was just 5 tetri per square meter, that would really have been much better. This anecdote just shows how bad governments perform, in this case the government run by the UNM, if they sell their land for 5 tetri per square meter.
Guest - Simon Appleby on Wednesday, 25 February 2015 01:20

As I mentioned during the seminar, only about 20% of Georgian farmland is registered on the electronic cadastral map. According to current practice, if your plot does not appear on this map, the state owns it by default and can privatise it or lease it out to another party.

Shevardnadze-era land titles were paper titles, and these can be converted to electronic titles by payment of a hefty fee for surveying, costing around GEL400/Ha. The surveyor's cartel has resisted rationalisation of this in the past. Of course many thousands of smallholders possessing old paper titles might wish to protect themselves from expropriation by registering electronically, but they don't have the means to pay the surveyor.

Also, many smallholders deliberately avoid registering their lands as they will be liable for land tax if the total area exceeds 2.5 Ha. Many smallholders are nervous about having welfare payments withheld if they register all their plots, even if they are cash-poor and the plots undeveloped or infertile.

Sooner or later, the government must get the bit between the teeth, acknowledge that land registration is a public good, flood the market with newly trained surveyors, and offer a 12 month grace period for cadastre registration of all farmland for free. Public Service Announcements on TV in Georgian, Russian, Azeri and Armenian should advise that land left unregistered after the due date will be auctioned off with no appeal so nobody will have excuses for not acting.

Allocating further plots of state land for free to farmers who are not even using their existing land resources (which is the case in more than half of plots currently) would be reinforcing failure. That is not land reform, it just exacerbates land fragmentation, and entrenches Georgia's vulnerable food security position. Subsidised 10-year mortgages for smallholders owning less than 2.5 Ha would a just method for dynamic and industrious smallholders to affordably enlarge their holdings, bring them into the tax system and help them operate small ventures that have enough scale to make economic sense. It would avoid the prospect of retired, absent or uninterested village dwellers acquiring more state land at no cost that they will never put into production anyway. Domestic, joint-venture and foreign agribusinesses in most cases would be uninterested in parcels of less than 5 Ha anyway, regardless of legislation, so it is unlikely that foreign capital would crowd such small players out of their niche in the land market by outbidding them on very small plots. Restoring Georgia's food security situation is a vital issue for Georgia's survival as a sovereign nation, which will require billions of dollars in private capital as well as world-class management and modern technology, and this cannot be accomplished in a timely manner by domestic investors, donors or the State.

As I mentioned during the seminar, only about 20% of Georgian farmland is registered on the electronic cadastral map. According to current practice, if your plot does not appear on this map, the state owns it by default and can privatise it or lease it out to another party. Shevardnadze-era land titles were paper titles, and these can be converted to electronic titles by payment of a hefty fee for surveying, costing around GEL400/Ha. The surveyor's cartel has resisted rationalisation of this in the past. Of course many thousands of smallholders possessing old paper titles might wish to protect themselves from expropriation by registering electronically, but they don't have the means to pay the surveyor. Also, many smallholders deliberately avoid registering their lands as they will be liable for land tax if the total area exceeds 2.5 Ha. Many smallholders are nervous about having welfare payments withheld if they register all their plots, even if they are cash-poor and the plots undeveloped or infertile. Sooner or later, the government must get the bit between the teeth, acknowledge that land registration is a public good, flood the market with newly trained surveyors, and offer a 12 month grace period for cadastre registration of all farmland for free. Public Service Announcements on TV in Georgian, Russian, Azeri and Armenian should advise that land left unregistered after the due date will be auctioned off with no appeal so nobody will have excuses for not acting. Allocating further plots of state land for free to farmers who are not even using their existing land resources (which is the case in more than half of plots currently) would be reinforcing failure. That is not land reform, it just exacerbates land fragmentation, and entrenches Georgia's vulnerable food security position. Subsidised 10-year mortgages for smallholders owning less than 2.5 Ha would a just method for dynamic and industrious smallholders to affordably enlarge their holdings, bring them into the tax system and help them operate small ventures that have enough scale to make economic sense. It would avoid the prospect of retired, absent or uninterested village dwellers acquiring more state land at no cost that they will never put into production anyway. Domestic, joint-venture and foreign agribusinesses in most cases would be uninterested in parcels of less than 5 Ha anyway, regardless of legislation, so it is unlikely that foreign capital would crowd such small players out of their niche in the land market by outbidding them on very small plots. Restoring Georgia's food security situation is a vital issue for Georgia's survival as a sovereign nation, which will require billions of dollars in private capital as well as world-class management and modern technology, and this cannot be accomplished in a timely manner by domestic investors, donors or the State.
Guest - Gurwinder Singh on Wednesday, 25 February 2015 15:25

we are no understand of govt.policy.govt.appoint a delicattion for check the Indian farm in kahketi ,Tsnori . here minimum 2000hq agriculture land which registerd on legal entity . we are working here since july 2012 .now 80% land in Tsnori developed by Indian [Punjabi] farmer . In this year minimum 1200 hq land seeding Wheat and in march seeding sunflower .

we are no understand of govt.policy.govt.appoint a delicattion for check the Indian farm in kahketi ,Tsnori . here minimum 2000hq agriculture land which registerd on legal entity . we are working here since july 2012 .now 80% land in Tsnori developed by Indian [Punjabi] farmer . In this year minimum 1200 hq land seeding Wheat and in march seeding sunflower .
Guest - Gurwinder Singh on Wednesday, 25 February 2015 15:30

One legal entity one legal entity have minimum 10 hq to 500 hq land .Govt.every time refuse our VISA / TRC .lot of money waste in VISA /TRC . How can we do business here.

One legal entity one legal entity have minimum 10 hq to 500 hq land .Govt.every time refuse our VISA / TRC .lot of money waste in VISA /TRC . How can we do business here.
Guest - Gurwinder Singh on Wednesday, 25 February 2015 15:33

if Govt.,support us . In Tsnori in one year we take two crops .

if Govt.,support us . In Tsnori in one year we take two crops .
Guest - megiddo02 on Thursday, 26 February 2015 20:53

Simon, I fully agree with your suggestion for the government taking over the land registration with their own surveyors.

I do not agree with your argument not to give the land to the people. You think the government is doing better in administering that land? The government will for sure not start any sound economic activities with that resource!

The whole problem with foreign farmers etc. just results from the fact that the land was not given to the people in due time but kept by the government and then unwisely sold to foreigners (disregarding local interests). The whole story reveals government failure, not "people failure". Keep the land with the government and you will have more of that.

If people do not utilize their plots, then obviously it is not profitable for them to do so. However, if they had more land, it might become profitable. Also doing the registration and then selling it becomes more profitable once you have more land. From an economic point of view, selling the land is a totally viable option -- nothing wrong with that. Alternatively, if they would get the registration for free through the mechanism you propose, they would use the land for their own economic activities or sell it, both would be good.

Leaving the land with the government is the worst option. The government is totally inefficient in utilizing this resource.

Simon, I fully agree with your suggestion for the government taking over the land registration with their own surveyors. I do not agree with your argument not to give the land to the people. You think the government is doing better in administering that land? The government will for sure not start any sound economic activities with that resource! The whole problem with foreign farmers etc. just results from the fact that the land was not given to the people in due time but kept by the government and then unwisely sold to foreigners (disregarding local interests). The whole story reveals government failure, not "people failure". Keep the land with the government and you will have more of that. If people do not utilize their plots, then obviously it is not profitable for them to do so. However, if they had more land, it might become profitable. Also doing the registration and then selling it becomes more profitable once you have more land. From an economic point of view, selling the land is a totally viable option -- nothing wrong with that. Alternatively, if they would get the registration for free through the mechanism you propose, they would use the land for their own economic activities or sell it, both would be good. Leaving the land with the government is the worst option. The government is totally inefficient in utilizing this resource.
Guest - Gurwinder Singh on Friday, 27 February 2015 01:09

many local people want to sale land now in tsnori

many local people want to sale land now in tsnori
Guest - Simon Appleby on Friday, 27 February 2015 13:44

Florian, my suggestion is that all farmland should be privatised. I agree the state does not know how to manage this resource, indeed the number of state farmland leases signed in the past 2 years can be counted on two hands.

Land should not be given away but auctioned off to anyone who wants to make use of it, local or foreign. As a matter of social justice, I think it would be fair for dynamic smallholders with less than 2.5 Ha to enlarge their holdings up to 20 Ha with a cheap mortgage, but it should not be a gift. Within 12 months of property registration being completed, 100% of Georgia's farmland should be in private hands and in active production soon thereafter.

Florian, my suggestion is that all farmland should be privatised. I agree the state does not know how to manage this resource, indeed the number of state farmland leases signed in the past 2 years can be counted on two hands. Land should not be given away but auctioned off to anyone who wants to make use of it, local or foreign. As a matter of social justice, I think it would be fair for dynamic smallholders with less than 2.5 Ha to enlarge their holdings up to 20 Ha with a cheap mortgage, but it should not be a gift. Within 12 months of property registration being completed, 100% of Georgia's farmland should be in private hands and in active production soon thereafter.
Guest - Jaswinder Singh on Monday, 02 March 2015 04:11

The percentage of land use this year include a little contribution by indian farmers also. This year they take land on lease also to grow wheat in tsnori. They are contributing to the economy of georgia but these thankless people are behind them. these georgian are now greeding the indian farmers lands. i think not a single farmer of indian origin bought land from auction of lan by government. They bought it from local. Now these local again want their land back. If so is the case let them pay the actual price plus bank credit charges @ 30% per annum and take their land back. We are ready to sell our land again to the owner from which we bought the land Not from other farmers who have no link to that land.

The percentage of land use this year include a little contribution by indian farmers also. This year they take land on lease also to grow wheat in tsnori. They are contributing to the economy of georgia but these thankless people are behind them. these georgian are now greeding the indian farmers lands. i think not a single farmer of indian origin bought land from auction of lan by government. They bought it from local. Now these local again want their land back. If so is the case let them pay the actual price plus bank credit charges @ 30% per annum and take their land back. We are ready to sell our land again to the owner from which we bought the land Not from other farmers who have no link to that land.

[&] Eric Livny and Salome Gelashvili have written about this event. [&]

[&] Eric Livny and Salome Gelashvili have written about this event. [&]
Guest - Alex on Saturday, 25 April 2015 01:37

Of course they should.

Of course they should.
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