Georgia: A short introduction to the country

Georgia is a small, multiethnic country in the West Caucasus. In the north is the High Caucasus, which, with its 5000 m high mountains, forms the border with Russia. In the west lies the Black Sea, and in the southwest, south and east, Georgia borders Turkey, Armenia and Azerbaijan. Five climate zones make Georgia favourable for agriculture with diverse products, including wine, citrus, tea, fruits and hazelnuts. The country is considered one of the origin areas of Homo sapiens, and it has a very long history. In Greek times, Georgia was well known through its kingdom of Colchis, which was situated on the eastern coast of the Black Sea. The eastern part of Georgia belonged to the ancient kingdom of Kartli-Iberia.

After a period under Roman influence, the Christian religion was adopted as the state religion in the early fourth century. In the course of the next few centuries, Georgia was dominated by Persians, Arabs and Turks. Then, from the eleventh to the thirteenth century, the country enjoyed a golden age and freedom from foreign domination. However, in 1236 the Mongols put an end to the golden age, and, subsequently, both the Ottoman and the Persian empires tried to take control over the country. In the nineteenth century, Georgia became part of the Russian Empire. This was followed by a brief three-year period of independence from 1918 to 1921, during which time Georgia was a democratic republic. Georgian independence came to an end when the Soviet Union forced the country to join it as a Soviet Socialist Republic, which it remained until the Soviet Union broke down in 1991. In that year, Georgia became independent, and, in 1995, the country adopted a new constitution, becoming a presidential republic. In 2003, under Eduard Shevardnadze, president since 1995, the government tried to manipulate national legislative elections, which lead to mass protests and Shevardnadze’s resignation. Since 2004, Mikheil Saakashvili and his National Movement party have been in power (CIA 2006). Also, after independence, the economic system changed from communism to a market economy.

Today, one of the biggest problems Georgia faces is internal ethnic conflict, which threatens territorial integrity. The Ossetian and Abkhazian minorities declared independence of their autonomous regions without internal acknowledgement or

acknowledgement by the international community². The political status of these two regions remains unclear (Kortenbusch & Cervoneascii 2003), and the situation worsened with the war between Georgia and Russia in August 2008. The secessionist regimes of the two breakaway regions are backed by Russia control of 15 percent of Georgian territory (Freedom House 2006 p. 2). Despite the political changes after the peaceful Rose Revolution of 2003, poverty still remains strong, with over 51 percent of the population living below the official poverty line and 17 percent under the extreme poverty line (UNDP 2005 p. 7).

Regarding employment, only 11 percent of the working-age population receives regular salaries (DS 2008b p. 24). This situation is forcing a large part of the population into subsistence farming or into informal economic activities, which limits the amount of tax income the government can raise. In addition, Georgia suffers severely from corruption. In 2003, Georgia ranked 124th out of 133 surveyed countries on an index developed by Transparency International (Kortenbusch & Cervoneascii 2003 p. 20). Since then, the corruption rate has dropped considerably. In 2008, Georgia was in 67th place out of 180 countries (TI 2008). Demographically, the country is characterized by the emigration of young, working-age people and by a low birth rate, with an average of 1.44 births per woman (CIA 2009). Life expectancy is high—70 for men and 79 for women (DS 2008a p. 35). Furthermore, rural areas show a high proportion of pensioners (Kegel 2003). Emigration, low birth rate and a relatively high share of pensioners have led to a constant decrease in population. In 1996, the total population was 4.7 million; by 2007, it had decreased to 4.4 million (DS 2008b p. 77).

Official statistics indicate that 55 percent of the working age population is employed in the agricultural sector (DS 2008a p. 44). In this sector, 80 percent are self-employed (EIU 2003 p. 19). The average farm size is 0.9 hectare (Lerman et al. 2003 p. 15; SDS 2005 p. 55). The small surfaces are used for subsistence farming, on which 84 percent of the rural population depends, and 80 percent of the produce is consumed by the farm families themselves (Heron et al. 2001 p. 9). Agricultural output declined from 40 percent of total GDP in 1995 (Dzirkvadze 2008 p. 2) to 13 percent in 2008 (CIA 2009). With regard to land ownership, 25 percent of all agricultural land is privately owned (DS 2005a p. 20). At the same time, the rural population increased

2 Russia, Venezuela and Nicaragua acknowledged Abkhazia and South Ossetia officially after the war between Georgia and Russia in August 2008.

considerably—from 48 percent in 2004 (DS 2005a p. 8) to 57 percent in 2005 (DS 2005b table 9.1). This increase was ascribed to ongoing long-term unemployment, which pushed people into subsistence farming (see Lerman et al. 2003). According to Kegel (2003), the Georgian government is not able to provide food security, thus further increasing the tendency towards subsistence farming to ensure food security in rural areas. Dzirkvadze (2008 p. 5) enumerates the problems faced by the rural population:

- Increasing food prices.

- Higher costs for transportation, input and fuel.

- Price increases due to agro-climatic conditions like floods, droughts and frost periods.

- Increasing rural poverty due to a deterioration of prices for agricultural products;

many rural dwellers are absolute or net food buyers.

- A shift to consumption of lower quantity and quality of foodstuffs in order to lower expenses (as customers).

- Withdrawal from the market and reversion to low-input, low-output production for home consumption (as producers).

In an effort to enhance Georgian agricultural productivity, international organizations have created various projects and programmes. One of these is AgVantage, a project created by the US NGO ACDI/VOCA. AgVantage identifies new markets for specific Georgian products, provides training and introduced leasing to improve access to agricultural equipment. It has helped to establish four associations and three cooperatives (ACDI/VOCA 2007 p. 2). The project advises the Georgian Ministry of Agriculture on the development of a long term national strategy for the food and agricultural sectors (ACDI/VOCA 2007). AgVantage has also introduced new crop varieties, including apples, onions, greens, berries and grapes stemming partly or totally from the U.S. (ACDI/VOCA 2007; Karchava 2006). The problem with the new varieties is that old, partly endemic Georgian varieties may become extinct, which will decrease biodiversity and will damage the cultural heritage, especially with regard to winegrowing. Given the fact that over 500 grape varieties grow in the country, wine can be regarded as a symbol of Georgian culture.

The reason for the high incidence of poverty lies in the change from communism to a market economy. The market economy requires the production of competitive

products with modern technologies and in line with high standards. As Georgian farmers do not have access to better technologies, their products are not competitive on local and international markets. Agricultural work is predominantly performed with the

‘spade and hoe’ technology. The lack of input supply is the legacy of communism, which was characterized by an absence of markets for these production factors (Mathijs & Swinnen 1998). The opportunity to work in the cities also decreased rapidly, due to the closure of almost all manufacturing facilities after the breakdown of the Soviet Union (Dzirkvadze 2008). Furthermore, the unstable political situation since the 1990s has damaged the agricultural sector. The government has not been able to provide technical and financial support to farmers due to the civil war. Consequently, banks do not trust the Georgian economy, especially not agriculture (Dzirkvadze 2008), which has entailed a severe lack of access to credit (Brown et al. 2000; Gardner

& Lerman 2006; Kortenbusch & Cervoneascii 2003). To summarize, the main constraints for Georgian farmers are lack of access to credit, lack of marketing opportunities and lack of input supply (Brown et al. 2000; Heron et al. 2001). In addition, there is no nationwide agricultural extension system (Kemkhadze 2008).