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Agricultural cooperatives in Georgia: Hopes and challenges

Janos HERMAN, European Union Ambassador to Georgia
Thursday, February 5
Not that long ago, farmers' cooperatives were ignored or totally misunderstood in Georgia. They were often associated with the kolkhoz, the ancient Soviet collective farms.

Now the situation is different, agricultural cooperatives are much better understood. This is due to the efforts of the Ministry of Agriculture, supported by EU and FAO experts. Civil society organizations, many of them financially assisted by the EU, have also contributed to changing the old approach. Georgia has a law on farmers' cooperatives and an efficient Agency to promote business-oriented agricultural cooperatives. There is a vibrant reality of hundreds of farmers' groups adopting cooperative status.

Policy-makers, the media and, most importantly, the farmers themselves, are realizing that cooperatives have nothing to do with land collectivization. They aim to help farmers to gain economies of scale by joint access to agriculture inputs and to the markets. Thus, cooperatives, rather than going back to the past, allow farmers embracing in full the benefits of an open market economy. Nowadays, most trade transactions involve big volumes, demanding sophisticated food safety and food quality standards. It would be very hard for small farmers to play any role, unless they are able to cooperate among themselves and sell their production jointly.

The European Union is proud to have contributed to the very positive path of cooperative development taking place nowadays in Georgia. Many years ago, when almost no one else was paying attention to this subject, the EU started dialogues with the government, the parliament, civil society organizations and others all on the potential contribution of cooperatives to modernizing small farming in Georgia.

We provide GEL 115 M to the farming sector in Georgia through the European Neighbourhood Programme for Agriculture and Rural Development (ENPARD). In this programme, there is strong emphasis on cooperatives. What do we do? We provide capacity building and technical assistance to the Agricultural Cooperatives' Development Agency and to the Ministry of Agriculture. We also allocate funds in the state budget of Georgia for this purpose and finance grants and other actions in the field, all over Georgia, via 15 civil society organizations. The aim is to support at least 160 modern small farmers' cooperatives.

Business-oriented cooperatives play a pivotal role in European agriculture. In most European countries, a large part of the population, engaged in primary production, are small farmers. The majority of them (and also of the big and medium size farmers too) are members of cooperatives. In total, there are 9 million agriculture cooperatives members across the EU, which means than 2 out of every 3 farmers is a member of at least one cooperative.

The role of agricultural cooperatives in Europe cannot be overestimated: They represent over 60% of shares of the collection, processing and marketing of agricultural products. The total turnover of the European agricultural co-operatives is around Euro 260 billion. Some of the biggest cooperatives have turnovers three or four times the total budget of the ministry of agriculture of Georgia!

Cooperatives are a very important economic actor, but not only that. They can also play an important role in raising the voices of the farmers and in supporting local communities in the rural areas. In a healthy democracy, the different sectors of the society can promote their own interests in a participatory manner. This is indeed one of the key roles of the cooperatives.

There is huge expectation now in Georgia about what cooperatives achieve. The EU is certainly part of this, also as a key contributor to the process. Nevertheless, it is also important to understand that cooperatives are not necessarily the best option for everyone. Many farmers will never join cooperatives. That is of course fine. Cooperatives can only succeed if they are run in a professional manner and with a strict business orientation. Cooperatives are to be based in the principles of voluntary membership, commitment, leadership and a sound and effective financial management.

The development of agricultural cooperatives is not, by itself, a magic formula that will solve all the problems Georgian farmers face. Besides supporting farmers' economic cooperation, efforts are also needed for improving education, providing advisory services to the farmers, improving the land registration system, developing further the irrigation networks, facilitating access to finances and so on.

The agricultural sector is a complex one, requiring long-term and coherent approaches. We know that this is also the vision of the Government of Georgia and we welcome the continuous efforts to bring such long term and strategic vision.

The modernization of the agriculture and food sectors is crucial for Georgia to become a more inclusive society and to ensure that the current disparities between urban and rural areas will be reduced. It is also critically important for sound economic development. Georgia needs to reduce its current trade deficit, agriculture can indeed contribute to this.

Georgia is on the path of coming closer to Europe. The Association Agreement and DCFTA are key milestones in this. Modern, business-oriented cooperatives are an essential tool for Georgian small farmers to take the best out of these agreements, and to shape itself along the lines of the way agriculture is understood in Europe.