At least on paper, Georgia has all it takes to be a successful agricultural producer: a favorable tax environment, mild climate, long growing season, inexpensive labor force and abundant water resources.
There are also many other factors that make Georgia’s agricultural sector a target for foreign investors, such as Simon Appleby: great access to markets thanks to a strategic geographic location and transport links, relatively low land prices, and the ability of foreign-invested entities to acquire freehold land titles (quite an exception considering the international practice!). Yet, as ISETers learned from Mr. Appleby’s SWOT analysis, there are also many bottlenecks to be addressed.
Simon Appleby has been now several years in Georgia, managing YFN Georgia LLC investments in the agricultural sector. His company’s blog http://yfngeorgia.wordpress.com/2011/10/13/hello-world/ is a great resource for anyone interested in understanding the challenges and opportunities facing foreign investors in Georgia.
Mr. Appleby began his public lecture by discussing the scope of the agribusiness sector in Georgia and its major advantages from the investors’ point of view. Next, Mr. Appleby identified some areas for improvement. For instance, while Georgia has abundant water resources, how these water resources are managed in the countryside is important. The irrigation and drainage systems in Georgia are by and large in disrepair and sometimes water is diverted in inefficient ways. In many places across the country, village infrastructure is similarly dilapidated and the lack of land titling in some areas makes it difficult to ensure the use rights of purchasers. While agricultural land is relatively low priced, grazing land can also be fairly expensive. A fragmented and unrecorded supply chain is also seen to be an impediment to growth in the sector. Rural credit and insurance markets are either absent or in need of development. The transportation system is viewed to be inefficient and expensive for investors. Lastly, the lack of proper vocational training, higher education in agriculture, and extension services in Georgia are also major weaknesses of the sector, Mr. Appleby argued. The lack of cold storage, grain storage, grain drying facilities, and deep processing of fruits and vegetables are also current drawbacks of the Georgian agribusiness sector. However, Mr. Appleby suggested that these and many other weaknesses could also be seen as potentially profitable opportunities for investors. Additional opportunities for investors may include winter and off-season production of different agricultural commodities, along with the provision of rural insurance, financial, consulting, and rental services. Export of agricultural products to neighboring countries could also be profitable for investors. The final step in any SWOT analysis is an identification of potential threats. For the Georgian agribusiness sector, these threats may be geopolitical in nature, depending on what events occur in neighboring countries. However, the threats could also be domestic, in particular relating to the uncertainty of government policy now and in the future.
