South Caucasus Gateways Agro-Food Value Chain

Expected Benefits
Improved Food security
from improved farm incomes,
diversified production (to higher value crops), and
more land available to increase production
Improved agri/food and logistics infrastructure to support efficient function of value and chill chains with storage to stabilise pricing fluctuations and enable unified trading platform
Improved border control infrastructure investment and efficiencies and therefore faster transit for the regional strength of perishable product e.g. apricots, tomatoes
Improved government revenue i.e. for ‘transit’ and HUB countries such as Georgia South Caucasus Gateways Agro-Food Value Chain Assessment<br>

New Political Environment Affecting Agro Supply Chains
The 44-day war of 2020 led to a move away from Azerbaijan agri-produce for key Russian markets to agri products from Iran – also known as ‘apricot wars’
The Russian invasion of Ukraine has led to
an increased dependency on the Russian market for agri products and the shift of trade flows and agri logistics movement to the North – South Corridor trading and logistics systems and Iranian agri produce (and wider).
unsustainable pressure on the logistics and transport of perishable produce through the only export route to the key Russian market via Georgia, with congestion and delays of vehicles carrying perishable produce through LARS checkpoint (delays of up to 1 month). South Caucasus Gateways Agro-Food Value Chain Assessment<br>

New Political Environment Affecting Agro Supply Chains (cont’d)
The Russian invasion of Ukraine has led to
significant increases in transportation costs and a lack of vehicle availability for regional producers to export. The result has led to producers attempting to keep produce in cold storage longer (and there is a scarcity of cold storage) and this is leading to significant product price variations.
small traders and exporters cannot sustain their business, which leads to cash flow and income reduction for farmers. A combination that overtime will create food insecurity in the regions with small to medium farming communities.
increased level of business for larger and in some cases monopolistic organisations in production, transport, and logistics who use their influence and gain commercial advantage by reducing the impact of the issues felt by other smaller exporters. South Caucasus Gateways Agro-Food Value Chain Assessment<br>

Short-Term Increase in Regional Trade Volumes
The Russian invasion of Ukraine has led to significant increases in trade flows and transit flows for Georgia and Armenia in the short-term destined for the Russian market.
The seaport of Poti (Georgia) and its road transport partners has seen bulk and containerised trade volumes increase by 320% in the last two months, with particular increases of imported perishable produce from Egypt i.e. bananas and potatoes and exports from PRC of tomato paste to Italy.
Armenia has seen its perishable produce exports (including re-exports) increase dramatically as a result of the shift to the North-South Corridor transit routes.
Multiple retailers are investing in local sourcing strategies and the corresponding development of distribution centres both for in-country and regional country supply of produce.
Governments in the region are accelerating their strategies for increased local production South Caucasus Gateways Agro-Food Value Chain Assessment<br>

Medium Term Downside Risks
Diversification away from the Russian market dependency will be more difficult
Georgian Poti port is focused entirely on imports and does not see an export function for containerised and perishable produce through Georgia as viable, although they do see exports from China/Uzbekistan/Kazakhstan via Georgia as viable in the future
Georgia’s opportunity as an East –West transit HUB for perishable produce appears to be closing, with the corresponding impact on the route for Turkish exports through Georgia and therefore reduced volumes. South Caucasus Gateways Agro-Food Value Chain Assessment<br>

Development Opportunities
Overall there has never been a more important time a South Caucasus agreement of cooperation in agri produce (particularly for perishable products) potentially in the form of a unified platform for processing, storage and logistics, both digital and physical infrastructure
To enable the East-West Corridor and Georgia HUB ambitions, benefits of the Poti/APM developments should be leveraged on imports of containerised product and, a case should be made for exports to the EU from Azerbaijan and wider. Turkish produce that transits through GEO could also benefit, unless Turkiye finds a solution to the opening of borders to access the North-South corridor.
To support the development of domestic production in each country in the region, the strategy of multiple retailers e.g. Carrefour in Georgia to develop in-country and regional DC’s should be supported.
Where there are monopolistic systems in logistics and transport systems, particularly in the North-South corridor developments, the ‘economic operator’ approach should be promoted, to look beyond pure commercial benefits to for example support of the farmers through standards development and agri-processing/packaging facilities. Ensuring a better price for farmers produce and strengthening the food security of the country. South Caucasus Gateways Agro-Food Value Chain Assessment<br>