Kakheti Regional Development Strategy 2009-2014

Kakheti Regional Development Strategy 2009–2014 Administration of the Governor in Kakheti Region Prepared by the Administration of the Governor in Kakheti Region and Kakheti Regional Development Agency The views expressed here are those of the authors and not necessarily those of UNDP. This document is prepared and published with UNDP technical and financial support. Preparation of the document made possible with the financial contribution of the Romanian Government UNDP Kakheti Regional Development Project No. 00045135 Gavarnment of Romania 3KAKheti ReGioNAl DeveloPmeNt StRAteGy Contents 1. IntroduCtIon .................................................................................................................................................... 8 2. the vIsIon for KaKhetI regIon development, 2009–2014 .................................................................. 8 3. the legal BasIs for regIonal strategy development ..................................................................... 9 4. general CharaCterIstICs of KaKhetI regIon .................................................................................... 10 5. analysIs of the Current sItuatIon ........................................................................................................ 11 5.1 Labour Resources ............................................................................................................................................................ 11 5.2 The Healthcare Sector ..................................................................................................................................................... 12 5.3 The Education System .................................................................................................................................................... 13 5.4 Sectoral Breakdown of the Economy and Economic Growth ........................................................................................... 14 5.5 Agriculture and Viticulture ............................................................................................................................................. 15 5.6 Tourism ......................................................................................................................................................................... 22 5.7 Environmental Considerations ........................................................................................................................................ 23 6. assessment of the CompetItIveness of the regIon ........................................................................ 25 6.1 Physical and Geographical Environment ......................................................................................................................... 25 6.2 Agriculture ..................................................................................................................................................................... 25 6.3 Physical Infrastructure .................................................................................................................................................... 25 6.4 The Labour Force ........................................................................................................................................................... 25 6.5 Tourism ......................................................................................................................................................................... 25 6.6 Other Sectors of the Economy ........................................................................................................................................ 26 7. regIonal development perspeCtIves and trends ........................................................................... 26 7.1 Labour Market, Education and Healthcare ...................................................................................................................... 26 7.2 Sectoral Dynamics of the Economy and Economic Growth ............................................................................................. 26 7.3 Agriculture and Viticulture ............................................................................................................................................. 27 7.4 Tourism ......................................................................................................................................................................... 27 7.5 Environmental Considerations ........................................................................................................................................ 27 8. seCtor development prIorItIes for the KaKhetI regIon ............................................................ 28 8.1 Labour Market, Education, Healthcare and Other Social Issues ....................................................................................... 28 8.2 Regional Economy (Excluding Agriculture and Tourism) ................................................................................................ 28 8.3 Agriculture and the Wine Sector ..................................................................................................................................... 29 8.4 Tourism ......................................................................................................................................................................... 30 8.5 Environmental Considerations ........................................................................................................................................ 31 9. KaKhetI regIonal development prIorItIes for 2009-2014 ............................................................. 32 annex 1 ...................................................................................................................................................................... 35 Methodology, Principles and the Participatory Process of the development of the Regional Development Strategy annex 2 ...................................................................................................................................................................... 38 Statistical information on the wine sector in Kakheti Region, 2007 annex 3 ...................................................................................................................................................................... 44 Linkage of Kakheti Regional Development Strategy with the Basic Data and Directions Document and Central Budget Expenditure Priorities 2009-2012 Priority Directions for Akhmeta, Gurjaani, Dedoplistskaro, Telavi, Lagodekhi, Sagarejo, Signagi and Kvareli Municipalities ........................................................................................................................................ 44 5KAKheti ReGioNAl DeveloPmeNt StRAteGy The current work presents one of the first analysis of the prospects of one of Georgia’s most essential re gions - Kakheti. Kakheti is one of the most outstanding regions of Georgia with its economic potential. The diversity of natural conditions has defined the agricultural profile of the region; and the region’s specialization in viti culture and winemaking is not accidental: the main share in the region’s well developed food industry falls on the wine production. It is of high importance to work out the development strategy for separate regions in order to properly iden tify the region’s level of economic development so as to clearly classify the region’s full potential and its part in the economy of the country. It is noteworthy that the directions of the strategic development of Kakheti are framed on the basis of scanned, discussed and summed up suggestions and views of the regional and local authorities, NGO and business sector representatives of Kakheti. At the same time, those regional development priorities are very much in accord and very much the outcome of the main directions of social-economic developments of the whole country. It is the priority for the Ministry of Regional Devel opment and Infrastructure to prepare the works and analysis of this kind on the regional development in order to correctly recognize the startegies for future development of this or that region. We acknowledge the work of the experts being in volved in the preparation of this interesting piece of work and we wish them all the success in their future analysis of the regional development. Minister of Regional Developmant and Infrastucture Davit Tkeshelashvili 6 KAKheti ReGioNAl DeveloPmeNt StRAteGy We aren’t what we were. Let’s not be what we are: God saves those who serve as paths for their children. A man is a bridge for those in the rear, Set your sights on tomorrow to cope with today. Ilia Chavchavadze, King Dmitri’s Sacrifice In these two short verses written over a century ago, Georgia’s Father of the Fatherland, Ilia Chavchavadze, demonstrated that he well understood the journey upon which his beloved regional homeland, Kakheti, is now embarked. I think no one could have described more aptly than this great Georgian why one undertakes the creation of a strategy for the development of a nation or a region. It is a path or bridge from the past to the future to improve the lives of people today and tomorrow. Today in Kakheti a visionary leadership has not only seen the problems which abound, but more importantly has recognized the vast untapped potential of this special area of Georgia. They understand not just what their region was yesterday or is today, but what it can become. Together, and with help from those like UNDP, they have put together perhaps the most comprehensive lo cally-focused plan in Georgia for how a region might go about realizing its hopes and dreams. That plan is this document, the Kakheti Regional Development Strategy, of which UNDP is pleased to have been a part. When one thinks of Kakheti, the first thing that often comes to mind is its vast vineyards and rolling grasslands, for which the region is known. So when the idea of de velopment is raised, it should not be unexpected that ag riculture must be the centerpiece of any related strategy. Yet as promising as agriculture might be, perhaps no region in Georgia has a greater cultural, historical, and natural richness and promise as Kakheti. It is well po sitioned geographically to serve the Tbilisi markets to its west, and Azerbaijan and beyond to its east. Further more, its historic sites and beautiful nature makes the region a promising destination for tourism. To realize this vast potential—agriculture, tourism, lo cation—will require further development of the region’s infrastructure and of its education, research, health, and financial systems. It will require new and creative ap proaches to marketing, both itself and its products. And, equally if not more importantly, as it develops, Kakheti must find ways to protect and preserve its natural and cultural environment and social fabric. This strategy is the first step in achieving all these goals. UNDP is hon oured to have the opportunity to continue its work with people in the region as they continue their journey to wards a better future. UNDP Resident Representative in Georgia Robert D. Watkins 7KAKheti ReGioNAl DeveloPmeNt StRAteGy The Kakheti Regional Development Strategy (KDRS) 2009–2014, a clearly defined strategy for the socio-economic development of the region, was developed by the Administration of the Governor in Kakheti Region and the Kakheti Regional De velopment Agency, with the financial and technical assistance of the United Nations Development Pro gramme (UNDP). The KDRS is paramount for the Kakheti Region be cause it allows us to understand the current stage of the region’s development, helps to define the regional development objectives and ways to attain them, and contributes to mobilizing funds to this end. The KDRS will facilitate the allocation of budgetary resources for implementing economic development projects, manage the inflow of public investments and enhance the region’s attractiveness to investors. The main purpose of the KDRS is to facilitate sustain able economic development of the region and poverty reduction. The KDRS is a road map to overcoming current problems, to create job opportunities and in crease living standards in the region. KRDS is in line with the Basic Data and Directions Document of the Government of Georgia for 2009– 2012. The Administration of the Governor in Kakheti Re gion is committed to ensure the smooth and efficient implementation of this strategy, which will allow to overcome problems facing economic development with combined strength. This in turn requires that each of us actively participate in the development processes and initiatives in order to jointly achieve our aims. Governor of Kakheti Region Giorgi Gviniashvili 8 KAKheti ReGioNAl DeveloPmeNt StRAteGy The objective of the Kakheti Regional Development Strat egy (KRDS) is to facilitate regional economic growth, im prove its future economy and enhance the wellbeing of its population. The KRDS brings together the government, the private sector and civil society to discuss and plan on the creation of better conditions for economic develop ment and employment generation. The process of developing the KRDS allows the public to become real participants in the planning process and to define future directions for their communities. This natu rally requires a consolidated effort of people from various backgrounds with extensive experience. The KRDS aims to outline the discrepancy between cur rent and desired levels of development, and implement a vision and action plan. Kakheti’s RDS therefore sets con crete realistic objectives, in keeping with general economic development forecasts and available resources. Moreover, this plan is closely aligned with the national strategy and priorities, as set in the Basic Data and Directions Document (BDD) 2009–2012. Kakheti Region will become recognized by the world as a “motherland” region of wine, with growing wine clusters and successful exports. Kakheti Region will be established as an interesting and attractive region for international and domestic investors.  Priority sectors of the economy – wine and viticul ture, diversified agriculture with developed system of cooperatives and associations, various types of tourism, processing industry, trade, etc. – will be clearly defined and grow rapidly.  There will be an increasing number of growing and development-oriented businesses and enterprises. KRDS is a joint effort of the Administration of the Gov ernor in Kakheti Region, Kakheti Regional Development Agency (RDA) and the United Nations Development Pro gramme (UNDP). In 2006, UNDP initiated its Kakheti Regional Development Project following the signing of a Memorandum between UNDP and the Administration of the Governor in Kakheti Region. The goal of the project is to contribute to poverty reduction and sustainable hu man development in the Kakheti Region of Georgia by promoting regional development tools and assisting in identifying means to diversify the economy and generate new jobs. Since then, the Kakheti Regional Development Project (KRDP) has undertaken a number of important projects, including a study on diversification opportunities for Ka kheti’s economy. The study revealed problems faced by the regional economy, alternatives, opportunities and pri orities. In 2008, in close cooperation with the Adminis tration of the Governor in Kakheti Region and Kakheti RDA, KRDP initiated the participatory process for the de velopment of the KRDS covering five years, 2009–2014. The region will become known for its programmes in support of entrepreneurship development; real and ef fective assistance will be provided to current businesses and start-ups. Living conditions will also be improved every year. Kakheti, together with Tbilisi, will gradu ally become a business centre and provide a successful model of public-private dialogue and cooperation. A basis of civil values will be established for the re gion; sustainable horizontal structures of self-gov ernance will be set up; an optimal level of public participation in the ongoing political and economic processes in the region will be attained; and sustain able mechanisms will be operational. 1. INTRODUCTION 2. THE VISION FOR KAKHETI REGION DEVELOPMENT, 2009–2014 iNtRoDUctioN 9KAKheti ReGioNAl DeveloPmeNt StRAteGy the leGAl BASiS foR ReGioNAl StRAteGy DeveloPmeNt By 2014, Kakheti will become a leading region in Georgia’s cultural and economic development, sup ported by a hospitality infrastructure – hotels, restau rants, networks of café-bars, tour operators, as well as regional and international events. The employment rate in the region will be high ac cording to international standards.  The region will experience an inflow of workers,  The region will set up special educational pro grammes to improve professional qualifications and skills of the local labor force. 3.1. overview of the regulatory basis for regional development in georgia Georgia lacks a comprehensive legislative basis for regional development largely because the status of the region as an administrative-territorial unit has not yet been defined. Regionalization of the country is, however, jeopardized by the Georgian Constitution, Article 2 (3), which al lows the Parliament to decide on the territorial arrange ment only after the restoration of Georgian jurisdiction throughout the entire territory of the country. This means that the regionalization of the country requires significant legislative changes. It should be noted that this is considered a priority task of the government; the President, Parliament and the State Minister for Region al Issues have authority to identify main directions in this area. In Georgia, the State Attorney–Governor oversees semi decentralized governance in the historical-geographic regions. At the same time, due to the lack of an adminis trative-territorial unit at the regional level, the territorial boundaries of the Governor’s jurisdiction are set accord ing to units of local self-administration based on respec tive territories. 3.2. overview and approval of the development proc ess of the regional development strategy Georgian legislation does not provide any direct au thority for the Governor or any other institution to approve a long- or medium-term plan setting out the directions and priorities for the socio-economic development of the region. This is attributed to the non-definition of the administrative–territorial status of the region and consequently, the lack of a regional budget. Despite these gaps, Georgian legislation does provide possibilities for partial regulation of the issue through the following mechanisms: 1. As stipulated by the Law of Georgia on the Struc ture, Authority and Operational Procedures, Article 271 (2)b, one of the responsibilities of the Regional Governor is “implementation of the socio-economic development programmes as tasked by the Govern ment”. Based on this statement, it could be conclud ed that this refers to concrete regional programmes, which are being implemented with budgetary or other funds for rehabilitating infrastructure and en hancing economic environment in the region. Thus, the development of concrete regional programmes is stipulated by the Law of Georgia on the Struc ture, Authority and Operational Procedures, Article 271 (2)b. 2. The same Law, Article 271 (2)i states: “The Governor implements other authorities defined by the Geor gian legislation.” Based on this statement, it can be concluded that the Governor is authorized to design a development vision and strategy of the territory un der his/her jurisdiction. 3. THE LEGAL BASIS FOR REGIONAL STRATEGY DEVELOPMENT 10 KAKheti ReGioNAl DeveloPmeNt StRAteGy Kakheti Region is located at the far east of Georgia. It consists of eight municipalities – Akhmeta, Gur jaani, Dedoplistskaro, Telavi, Lagodekhi, Sagarejo, Sighnaghi and Kvareli. The total area of the region is around 11,310 km2, which is more than 16 percent of the entire territory of the country. According to the 2002 census, Kakheti has a popu lation of 407,000, which is the fourth largest after Imereti, Kvemo Kartli and Samegrelo-Zemo Svaneti Regions. (By the end of 2006, the population was 404 000.) It is important to highlight that Kakheti is the least urbanized region in Georgia, with only 20 per cent of its population living in towns and settlements. Compared to the regions of a similar scale, Kakheti has fewer cities and towns, which plays an important role in determining its economic profile. A relatively large rural population plays a positive role in the economic sustainability of the region. The av erage village size in Kakheti is around 1,200 people, which is twice as large as the average village in Geor gia. This means that the abandonment of rural areas is not an acute problem in the Kakheti Region; on the contrary, the large size of the villages provides an excellent basis for efficient planning and implementa tion of economic development programmes. Kakheti is one of the regions with the lowest popula tion density, with only 35 people per km2. The vast majority of the population, except in Tusheti lives on lowlands, and most villages are located across the main transport routes. The dynamics of the population replicate the trend in other regions of the country. Between the 1989 and 2002 censuses, the population in Kakheti decreased by 9 percent, although this trend was much less manifest in rural than in urban areas. The average age is 38, and the aging trend of the population is apparent, again similar to that of the rest of the country. The climate in Kakheti is mainly continental. The far eastern part of the region, Lagodekhi Municipality, is relatively mild. The lowlands of Kakheti are characterized by low pre cipitation (400 mm), which gradually increases from the south and south-east towards the Caucasus Moun tains, reaching 2000 mm per year. The landscape in Kakheti is diverse, from semi-desert to ice-covered mountains. Kakheti does not have extensive river coverage, despite having two rivers exceeding 300 km in length – Ala zani and Iori. River basins are more extensive towards the Caucasus, especially in Tusheti. The Kakheti lowlands are not rich in forest resourc es. Forest areas are becoming more extensive towards Caucasus and Tusheti. Timber production is growing in certain areas of Kakheti, such as Akhmeta; effective use of forest resources is vital. The soil structure is relatively favourable for agricul ture development. It is important to mention that fer tile alluvial soils are widespread in the Alazani River Basin. Large amounts of brownish and black soils can be found in Kakheti. Kakheti has the highest ratio of fertile agriculture lands to the entire land resources and area per population in the country. Kakheti natural resources are not as significant as in Kartli and Imereti, with the exception of miner als, which are important for economic development. Lopoti marble resources and the thermal waters of Torgva Baths are its most important natural resourc es. Akhtala mud in Gurjaani Municipality is famous throughout the country. Oil is extracted in Signagi, Sagarejo and Dedoplistskaro Municipalities. Kakheti is also rich in construction and finishing materials, in cluding clay and plaster. Shakriani and October min eral water springs are found in Kvareli. Kakheti is famous for its protected territories, Vashlovani, Batsara-Babaneuri, Lagodekhi and Chac huna, which were created to preserve the unique flora and fauna of the region. Vashlovani and Tusheti Na tional Parks as well as Lagodekhi Reserve play a criti cal role in developing its tourism industry. 4. GENERAL CHARACTERISTICS OF KAKHETI REGION GeNeRAl chARActeRiSticS of KAKheti ReGioN 11KAKheti ReGioNAl DeveloPmeNt StRAteGy 5.1 labour resources Most of the Kakheti population are employed in agricul ture and trade. Employment opportunities in the region are fairly limited due to monoprofile of its agriculture dominated economy. The estimated labour force in Kakheti is 252,068 people, or 61.5 percent of the population; 47,398 people, or 18.8 percent of the population, are unemployed, while 294,670 people, or 81.2 percent, are employed. The major sectors of employment are as follows: agriculture, 82.1 percent (168,035 people); industry, 9.5 percent (19,440 people); education and healthcare, 6.3 percent (12,894); and other sectors, 2.1 percent (4,300). Special note should be made here to clarify that, according to official statistics, the rural population which owns certain amount of land is consid ered to be employed in agriculture. This methodology cer tainly leads to some unreliability and the unemployment problem in the region is much more acute than is sug gested by the statistics. The average salary per month in the public sector is GEL140, equivalent to US$82, while it is US$98 per month GEL167 in the private sector, which is relatively competitive in the country. However, according to unit cost of production, Kakheti is the lowest among the regions of the country, which could be explained by domination of subsistence ag riculture where level of productivity is typically low. The educational level in Kakheti is similar to that of the rest of Georgia. The region’s large geographical area and population, and the characteristics of its population distri bution are contributing factors to the development of its labour market. Most of the population lives near the high ways. The large size of the villages could also be considered an advantage for the region in developing local infrastruc ture in the short term. Nevertheless, the region might face an escalated labour re source deficit, due to the gradual ageing of the population, as well as migration, especially from the border regions (e.g. Dedoplistskaro). In fact, maintaining labour resourc es would be almost impossible without rapidly stimulat ing the agricultural sector. In addition, as in the entire country, there is no organized labour market in Kakheti Region, which might threaten investment inflow in the region, as employers face the problem of finding a quali fied labour force. 5. ANALYSIS OF THE CURRENT SITUATION laBour resourCes – sWot analysIs STRENGTHS WEAKNESSES  Large population  Advantageous location of settlements  Large size of villages  Cheap labour force  Industrious population  High level of basic education  High level of structural unemployment  Low degree of adaptation to modern market conditions  Lack of qualifications  An ageing population trend  Migration  Low level of urbanization OPPORTUNITIES THREATS  A large and cheap workforce that can be mobi lized in case of new developing sectors  Government-funded infrastructure projects  Growth of private investment  Potential growth of prices for Kakheti products  Insufficient investment  Limited opportunities for developing skills  Lack of management skills  Increased migration from the region  Inflation and other macro-economic shocks ANAlySiS of the cURReNt SitUAtioN 12 KAKheti ReGioNAl DeveloPmeNt StRAteGy 5.2 the healthcare sector The level of the healthcare sector in Kakheti was similar to that of other regions of Georgia in the recent past. Economic disasters of the 1990s have completely undermined and in many instances de stroyed the inefficient and corrupted system. The main goal of the current comprehensive health care sector reform is to ensure its accessibility, aim ing to overcome problems associated with poverty. This naturally implies developing financial mecha nisms that would allow large portions of the popu lation to have access to healthcare services. Among the latest trend, the most noteworthy is doubling of budgetary funding for healthcare and social sectors throughout the entire region. A relatively developed network of primary health care facilities/centres is one of the advantages of the regional healthcare sector. In addition, the trend of developing skills of local general practitioners and medical doctors, as well as their credibility, is another contributing factor to local healthcare de velopment, with growing numbers of individuals seeking medical care locally. However, an in-depth analysis has not been undertaken due to a lack of data and information, making it impossible to ar rive at any definitive conclusions. Possible reasons for the reduced travel to Tbilisi for seeking health care services could be attributed to increased trans portation costs and more rapid commercialization of healthcare, which impedes its accessibility. The positive development is increased participation of local medical doctors in seminars and other special ized training throughout the country. Notwithstanding the promising development of the institutional reforms, the medical equipment, supplies and technology base of the local health care system, especially that required for high-tech treatment, remains in poor condition. Equally un satisfactory are the management practices of local healthcare institutions. Healthcare policy still re mains uncoordinated. The insurance system needs many more years to develop, being in the embry onic stage in the region. healthCare seCtor – sWot analysIs STRENGTHS WEAKNESSES  Developed healthcare network  Widespread medical infrastructure  Specialists with high quality basic education and skills  Credibility of, and trust in, local medical spe cialists  Accessibility of opportunities for enhancing skills and qualifications  Lack of technical facilities  Lack of managerial staff  Lack of specialized staff and equipment  Lack of international experience  Low remuneration of healthcare specialists  Weak institutional base (embryonic insurance system) OPPORTUNITIES THREATS  Staff re-training  Perspectives for attracting donors and inves tors  Undecided status and ownership of the health care facilities  Potential negligence of the interests of certain groups of population during the healthcare sector reform process  Lack of transparent information ANAlySiS of the cURReNt SitUAtioN 13KAKheti ReGioNAl DeveloPmeNt StRAteGy 5.3 The education system The percentage of people with secondary and higher education in Kakheti is similar to the rest of Geor gia. In addition, the deteriorated quality of education gives sufficient reasons for having moderate expecta tions regarding education in Kakheti and the rest of Georgia. Only one of the higher education institu tions in the region has been granted national accredi tation in 2006 Moreover, education in the past, even in the basic sciences, may not have been adequate for modern labour requirements. This is an area that calls for support; some of the measures in this regard are already underway. Most of the population recognizes the importance of education, yet it remains unclear how many resources they are able and willing to allocate for the desired level and type of education. The problems faced by the regional education sec tor, which require national-level solutions, include inadequate remuneration of staff and teaching qual ity, as well as deficiencies in the management sys tem, which could not be considered specific to the region. The limited opportunities for education workers in the region for their participation in the international grant programmes and skills improvement courses are also national problems. Transforming education into a competitive advantage for the population of Geor gia in general and Kakheti in particular would first require an increase in budgetary funding for the edu cation sector followed by successful implementation of the comprehensive institutional reform, which will require several years. There is no comprehensive information on the type of labour force needed for the Kakheti economy in the long run. Undoubtedly, the regional economy will remain heavily focused on the agriculture and processing sectors in the coming decade, which will require specialists in the respective fields. There is some potential for developing skills in the tourism and industry sectors, although the competitive ad vantage of the Kakheti Region compared to other re gions of Georgia is less visible. eduCatIon – sWot analysIs STRENGTHS WEAKNESSES  Effective coordination system of the secondary education system  Reform of the secondary education system  Deepening international contacts and increased number of exchange programmes  Recognition of the value of education per se by the population  High demand on education by population  Inadequate quality and level of education  Low labour remuneration of education system workers  Still weak capacities and low level of qual ification of education system workers  Deficiencies in the education system man agement OPPORTUNITIES THREATS  Opportunities for capacity strengthening / increasing of level of qualification of the education system workers  National and international grant programs  Transparency of all levels of education institutions’ management  Availability of relevant skilled personnel  Lack of initiative  Inconsistencies in the legislation ANAlySiS of the cURReNt SitUAtioN 14 KAKheti ReGioNAl DeveloPmeNt StRAteGy 5.4 sectoral structure of the economy and eco nomic growth The economy of Kakheti Region heavily depends on the agricultural production and processing industry; other sectors of the economy – industry, trade, trans port, construction and tourism – are less visible in the economic profile of the Region. Analysis of economic growth in 2001–2006 indi cates that Kakheti Region has experienced difficul ties in developing potential for commercialization. The agriculture and processing industry remains heavily concentrated on the wine sector. Fruits and vegetable processing is almost non-existent in the region, despite its clear comparative advantage. The share of the Kakheti economy in the national economy, excluding agriculture, is less than 2 per cent. In addition, the regional growth rate of the economy falls behind that of the national level. In the near future, the low level of urbanization of the region will not facilitate development of the second ary and tertiary (industry and services) sectors of the economy, which is an impediment for regional growth. Labour productivity is also below the national aver age. The real growth rate of the entire economy of the region during the past five years is around 0 percent, and the sectoral composition of the economy is being shifted to some extent towards trade and the restau rant business. A trend of enterprises expansion is also observed in the region. However, the turnover of medium-size enterprises still remains very low. Accelerated de velopment of the trade sector is noteworthy in this context, which is in line with the national trend. This could be explained by the fact that although the economy in general suffers from limited capi tal, trade has modest requirements for initial capi tal and a higher turnover of this capital. Further development of trade is anticipated if the road from Tbilisi to Telavi is restored through the Go mbori Pass. Relevant consideration should be given to the fact that rapid growth of the industry, construction and transport sectors is not anticipated in the short and medium term due to the high interest rates of local banking capital and lack of alternative financing, as well as pattern of population distribution, character of economic profile and labor market. If a high growth rate is not achieved in the processing industry, the Kakheti population will face aggravated poverty in case of increasing world prices of fuel and food commodities. eConomy of the KaKhetI regIon (agrICulture and tourIsm exCluded) – sWot analysIs STRENGTHS WEAKNESSES  Favourable conditions for the development of the processing industry  Cheap base of raw materials (primary agricul ture)  Proximity to markets and relatively good transportation roads  Capacity and potential for timber processing and construction  Large population  Cheap but unskilled labour force  Extremely limited financial capital  Low compatibility of labour resources with market requirements  Low labour productivity  Small size of enterprises  Management problems  Low level of urbanization and relatively weak urban infrastructure ANAlySiS of the cURReNt SitUAtioN 15KAKheti ReGioNAl DeveloPmeNt StRAteGy 5.5 agriculture and viticulture agrICulture Kakheti is one of the most important regions with re spect to agriculture, having the biggest share, 38 per cent, of the total arable land of Georgia. Agriculture is important for the socio-economic development of the region, employing 82 percent of the labour force. Kakheti is rich in agricultural land resources. As shown in Figure 1, it is the leading region in the country for all major categories of agricultural land use: arable (annu ally cultivated, or fallow but available for annual culti vation), perennial crops (trees, shrubs, and vine crops) and pastureland, including mown land. With respect to the latter category, nearly 60 percent of all such lands in Georgia are found in Kakheti. As a result of these types of land and the climate in the region, Kakheti is the leading producer of cereals and cattle (beef/dairy). Source: Georgian Agriculture, Department of Statistics, Tbilisi, 2007 fIgure #1. dIstrIButIon of agrICultural land In KaKhet regIonI, 1 000 ha Arable 155 160 152 150 37 38 2006 2007 T h ou sa n d H a 180 160 140 120 100 80 60 40 20 0 Pastureland Perennial crops eConomy of the KaKhetI regIon (agrICulture and tourIsm exCluded) – sWot analysIs OPPORTUNITIES THREATS  Potential for improved efficiency in the process ing industry in view of increasing world prices  Local use of raw materials needed for trade  Good potential for effectively using of cheap labour in case of its training  Incentives created for the local private sector through the implementation of the national infrastructure projects  Fluctuating fuel prices  Further deterioration of the terms of trade in Georgia  Demographic problems, ageing population, migration and further reduction of labour re sources  Shortage of investment and capital  Inconsistency in government priorities  Global economic crisis, inflation ANAlySiS of the cURReNt SitUAtioN 16 KAKheti ReGioNAl DeveloPmeNt StRAteGy Dedoplistskaro is the largest municipality in Kakheti with the most agricultural land, followed by Akhmeta, Sagarejo and Signagi. Dedoplistskaro and Akhmeta, with the smallest populations, together with Signagi have the most agricultural land resources per person. In these three municipalities most of the agricultural land is under annual crops or pasture, while in Gur jaani and Telavi Municipalities, the land is mainly used for perennial crops. Thus, the profile of agri culture development for the municipalities is defined accordingly. Kakheti has traditionally been a leading region in ce real production in Georgia. This could be partly due to the availability of land resources, but also under developed irrigation, which limits opportunities for higher value crop production in non-irrigated areas. Naturally, higher value crops with higher per hectare efficiency are produced in irrigated areas, while non irrigated lands are left for cereals – wheat, barley, sunflower and corn. Cereals Kakheti has also traditionally been the country’s ce real production region. It is responsible for half of the total lands under wheat and the largest share of the wheat produced in the country. The share of Kakheti produced wheat has increased over the last years with other regions gradually decreasing wheat production. Due to large areas of non-irrigated agriculture land, Dedoplistskaro and Signagi Municipalities remain the leading wheat-producing areas. Barley is Georgia’s second most important cereal crop and is used primarily to feed cattle. As a consequence, annual production is generally defined by the situa tion in the cattle industry, i.e. its expansions, contrac tions and profitability. Although Georgia has a rapidly growing beer industry, it does not currently produce malting barley and therefore imports it. However, this might be an opportunity for the future. Kakheti, to gether with Samtskhe-Javakheti, are the leading barley producers in the country. Corn is another important cereal crop. Although Samegrelo and Imereti Regions have traditionally been leading corn producers in the country, it is also important for Kakheti both in terms of cultivated area and number of producers. Corn requires irrigation in eastern Georgia. It is there fore produced mainly in the municipalities where ir rigation is accessible and the precipitation level is sat isfactory, such as in Akhmeta, Lagodekhi, Telavi and Kvareli Municipalities. Sunflower is another important cereal for Kakheti Region. It is primarily used for oil extraction and is grown in non-irrigated areas in rotation with oth er cereal crops. Oilseed cake is also widely used for animal feed. Kakheti is responsible for around 80–95 percent of the total sunflower production in Georgia. However, its per hectare yield and profitability is far below that of wheat, and farmers usually plant sun flower if there are no other crop alternatives. Within Kakheti, nearly 50 percent of the entire sun flower production in 2004–2005 came from the De doplistskaro Municipality. However, productivity is significantly higher in Telavi and Gurjaani Munici palities due to the higher levels of precipitation. Melons and Vegetables Around 70–80 percent of the total melon and squash production (melon, sugar melon, pumpkin) in Geor gia comes from Kakheti. Per hectare profitability of melons exceeds that of cereals, yet production requires higher costs. Melons also necessarily require irriga tion, which at the same time is a limiting factor for its production in certain areas. Most of the irrigated areas are thus used for melons and vegetables production, with Signagi, Sagarejo, Kvareli and Lagodekhi being the leading producers. Kakheti is also a leader in peanuts production. The same limitation as above applies here; its production is therefore restricted to Lagodekhi and partially to Kvareli Municipalities. In terms of area under vegetable crops, Kakheti falls below Kvemo Kartli and is on average the same size as Shida Kartli Region. However, the average yield in Kakheti is lower than in these regions. Lagodekhi, Sig nagi and Gurjaani are the main vegetable-producing municipalities due to their climatic conditions and the availability of irrigation water. Fruits Although Kakheti is not specialized in fruit produc tion, the region still produces a large variety of fruits – ANAlySiS of the cURReNt SitUAtioN 17KAKheti ReGioNAl DeveloPmeNt StRAteGy stone fruits, seed fruits, subtropical fruits, berries and nuts. However, there are no large areas under fruit. Accordingly, fruit processing is small-scale, primarily at the household level. The only exception is Gurjaani Municipality, which specializes on the production of peaches. Kakheti is the top peach producer region in Georgia. The main fruit production municipalities are Kvareli, Signagi, Gurjaani and Telavi. Livestock Kakheti is one of the leading regions in Georgia in livestock production, which is an important sector of its economy. Availability of pastures and mown lands, as well as production of crops suitable for animal feed ing are some of the favourable conditions for develop ing this sector. Cattle Kakheti is the region with the largest number of cattle in Georgia followed by Imereti, Samegrelo and Kvemo Kartli. Sagarejo, Lagodekhi and Akhmeta are the lead ing municipalities within Kakheti in this regard. As concerns meat production, Signagi is also among the leaders, together with the above municipalities. Development of this sector of livestock production is largely due to the availability of pastures and mowing land, and residues of crop production. Milk production is becoming increasingly important for the region. Increased world market prices of milk powder has stimulated Georgian dairy producers to respond to the demand for locally produced raw milk, which included the expansion of the network of milk collection centres in Kakheti and Kvemo Kartli. Lagodekhi, Sagarejo and Akhmeta are the largest milk producers in the Kakheti Region, with development tendencies observed in all other municipalities. How ever, milk yield remains low at 1.2 tonnes per cow per year. Animal productivity could be increased through improved feed management and quality veterinary services, breed improvement and calving management to smoothen the seasonality of milk production. Pigs Samegrelo, Imereti and Kakheti are the largest the swine-production regions. All municipalities of Ka kheti Region produce pork, and according to 2005 data, the leading producers were Kvareli, Telavi, Akhmeta and Lagodekhi. In these four municipalities, forest resources are used for swine feed. In 2005, in six out of eight municipalities, pork production ex ceeded beef production. This shows increased demand for this product and its important role in the Kakheti economy and for households. In 2007, the number of pigs significantly decreased in Kakheti due to the spread of Montgomery’s disease. Sheep Kakheti has a long tradition of sheep raising, and not surprisingly, it is the region with the largest number of sheep in the country. Favourable conditions for sheep production in Kakheti are the availability of winter and summer pasturelands. Sheep and goats are present in all municipalities of Kakheti Region and their number exceeds that of swine. Akhmeta and Sagarejo are first among Kakheti Municipalities in producing lamb, sheep milk and wool, emphasizing the impor tance of this sector to the local economy. Poultry Samegrelo, Imereti, Kvemo Kartli and Kakheti Re gions have the most developed poultry industries. A relatively large volume of cereal production is a con tributing factor to poultry development in these re gions. Sagarejo and Lagodekhi Municipalities are the leading municipalities of the region in the poultry industry. Large-scale poultry farm enterprises are lo cated in Patardzeuli village of Sagarejo Municipality. Beekeeping Kakheti, with almost 20 percent of the total beehives in country, is considered a lead beekeeping region to gether with Imereti and Samtskhe-Javakheti Regions. It is also the leader in honey production together with Imereti. Since 2006, Kakheti has shown the trend of increasing honey production, in contrast to other Georgian regions. Beekeeping may be considered one of the region’s priorities, because it is rich with forests, flowers and fields under crops, which provide it with adequate resources. Kvareli and Gurjaani Municipalities in Kakheti Re gion lead in number of beehives and honey produc tion. These municipalities also show the trend of in creasing honey production. While most of Kakheti in general demonstrated a similar trend, Telavi, Signagi and Akhmeta show the reverse trend. ANAlySiS of the cURReNt SitUAtioN 18 KAKheti ReGioNAl DeveloPmeNt StRAteGy KaKhetI agrICulture – sWot analysIs STRENGTHS WEAKNESSES  Favourable climate and fertile lands  Existing infrastructure: roads, irrigation, gas and electricity supply systems  Abundance of agricultural lands  Large stock of livestock  Large experienced labour force  Original traditions and culture  Lack of a long-term plan for agriculture development at the national level  Low level of agricultural education  Lack of agricultural research centres and extension services  Lack of communication between farmers and researchers  Low productivity of agricultural crops  Low use of high-technology  Downgraded agricultural equipment  Insufficient irrigation infrastructure  Low productivity breeds of animals  Underdeveloped feed production  Lack of animal breeding  Lack of consolidation centres and processing facilities for agriculture products  Lack of food processing/canary factories  Lack of fruit storage facilities  Low level of farmer cooperation  Lack of longer-term and cheap credit resources  Lack of specialized agrarian markets in the region  Lack of crop insurance markets  Non-regulated forward contractual system between farmers and buyers  Inefficient system of food safety, plant protection and veterinary services OPPORTUNITIES THREATS  Construction of new 78 km road – Telavi-Vaziani-Tbilisi  Newly operational state supervision service on food safety  Development of a national long-term development strategy for agriculture  Improved quality of higher agrarian education  Development of agricultural research and extension services  Increasing productivity of agriculture crops through the introduction of innovative technologies, higher value planting materials and agriculture technologies  Facilitation of the formation of seed farms  Upgrading of the agrarian technological park  Improvement of animal breeding and veterinary services  Strengthening of the raw materials base for feed production  Development of consolidation and processing infra structure for agriculture products  Facilitating and strengthening of farmers’ cooperatives  Development of insurance systems  Development of agro-tourism  Political instability within and outside the coun try  Global economic crisis, inflation  Global warming and other natural disasters  Low diversity of products and markets  Massive spread of pests, and animal and plant dis eases  Consumer health hazards due to the lack of food safety control system ANAlySiS of the cURReNt SitUAtioN 19KAKheti ReGioNAl DeveloPmeNt StRAteGy VITICULTURE General Overview of Kakheti wine and vine sectors Kakheti is an ancient vine-growing and wine-produc ing region in Georgia. It is divided in two zones, inner and outer Kakheti, and has more than 25 microzones that have traditionally produced wines of appella tion origin – Tsinandali, Napareuli, Teliani, Akhash eni, Mukuzani, Kindzmarauli, Gurjaani, Kardenakhi, Manavi and others. Today, around 65–70 percent of all vineyards in Geor gia are concentrated in Kakheti Region. Production vineyards giving the best wines are located in the basins of Alazani and Iori Rivers, at 400-700 m altitude. The main orientations of the Kakheti wine-producing sector are high quality wine and quality table wines, both white and red, dry, semi-dry, naturally sweet and dessert wines. High quality European-type table white wines with a superior taste are produced in Tsinandali, Napareuli, Gurjaani, Manavi and other microzones from Rkat siteli, Kakhuri Mtsvane, Khikhvi, Kisi and other an cient local varieties. Table red dry wines are produced in Teliani, Akhash eni, Mukuzani and other microzones of Kakheti from the Georgian red grape variety Saperavi. Naturally sweet appellation wines are produced in the micro zones of Akhasheni and Kindzmarauli. Varietal quali ties of Saperavi as well as the microclimate and soils contribute to the rich taste of these wines. Table wine types were developed in Kakheti over the centuries. This is a particular type of wine produced ac cording to special recipes – when the hard parts of the grape are also involved in the fermentation process. Such wines are produced in special clay jars deep in ground to ensure constant temperature throughout the entire proc ess. Wines produced in this way have high sugar con centration, phenolic extracts and tannin content and a pleasant bouquet, as well as rich flavour and taste. The Current Situation in the Kakheti Vine Growing and Wine Production Sector Vine Growing – Main Statistical Indicators Gurjaani Municipality has the largest vineyards in Ka kheti, with total area covering 7,618 ha, followed by Kvareli, with 6,382 ha and Telavi with 6,048 ha. The smallest vineyards are in Dedoplistskaro, with 1,499 ha and Akhmeta with 1,747 ha. In Kakheti vineyards, the dominating variety is Rkat siteli, which exceeds Saperavi. The largest Saperavi areas are in Kvareli (2,316 ha), due to the increased demand for Saperavi produced in Kindzmarauli wine zone. In 2007, the best harvests of Rkatsiteli were in Kvareli (6.8 tonnes/ha), Akhmeta (6.6 tonnes/ha), Signagi (6.8 tonnes/ha) and Sagarejo (6.5 tonnes/ha), while the lowest was in Telavi (4.9 tonnes/ha). The highest yields of Saperavi were in Akhmeta, Te lavi, Gurjaani, Sagarejo and Kvareli, and the lowest in Lagodekhi and Signagi. In 2007, according to the Min istry of Agriculture data, more than 200,000 tonnes of grapes were harvested, of which up to 52,000 tonnes were processed by the wine producers, 110,000 tonnes were distributed in Tbilisi and other regions of Geor gia, and 50,000 were consumed and/or processed by households. The total areas of vineyards and average yield are given in Annex 2. Genetic Fund of the Kakheti Grape Varieties Unique Kakheti grape varieties are Kisi, Khikhvi, Ka khuri Mtsvane, Saperavi and Rkatsiteli, among others. In addition, there are many domestic grape varieties and populations that combine the main part of the genetic resources and provide the basis for improving production variety. Since 1930, a collection of Georgian grape varieties has been established within the Research Institute for Horticulture, Viticulture and Wine. To date, there are 422 grape varieties in this collection. Kakheti Vineyards – Current Situation To date, Kakheti viticulture is represented by the old vineyards established in the 1960s–1970s (around 85–90 percent of the total vineyards) and new ones (10-15 percent of the total vineyards). Rkatsiteli and Saperavi were the dominating varieties in the old vineyards from Soviet times, when the focus was on quantity, causing an almost complete elimina tion of famous Georgian varieties such as Kisi, Khikh vi, Mtsvane and Mcvivana. ANAlySiS of the cURReNt SitUAtioN 20 KAKheti ReGioNAl DeveloPmeNt StRAteGy Old vineyards are depreciated, and therefore, the per hectare yield is low – around 2–2.5 tonnes/ha. They need urgent rehabilitation to increase productivity and improve quality. At the end of 2007, the Ministry of Agriculture has started implementing a special programme for eliminating the hybrid variety “Vakirula” and has allocated GEL 1 million for this purpose in order to compensate farmers for every destroyed hectare with GEL 2,000 per ha. The second half of 1990s was distinguished by the creation of new vineyards. This process took off most rapidly in Telavi, Kvareli and Gurjaani Mu nicipalities, because there are world-famous wine producing microzones: Kindzmarauli, Akhasheni, Mukuzani, Tsinandali, Vazisubani and Napareuli. This period also coincided with the growth of in vestor interest. Statistics on new vineyard areas per municipality is incomplete, however. The estimated area under the new vineyards is around 5,000 ha with estimated investments of US$40–55 million, assuming that 1 ha requires around US$8,000– 11,000. This process has not been significant in Akhmeta, Signagi, Sagarejo, Lagodekhi and Dedop listskaro Municipalities, where vine growing is not a leading sector. The breakdown of new vineyards per variety is as follows: Saperavi, 96 percent; Cabernet Franc, Ca bernet Sauvignon, Pinot Noire, Merlot, Malbec and other red French varieties, 1.8–2 percent; and an cient Georgian white varieties – Kisi, Khikhvi and Kakhuri Mtsvane, 2–2.2 percent. Grape Seedling Production “Arivie-Georgia” nursery, established by foreign and Georgian investors in Kondoli village of the Telavi Municipality is the only nursery in Georgia, whose seedlings comply with European standards. Part of the seedlings produced here are exported and part are sold domestically. This is a unique nursery, not only in Georgia, but in the entire South Caucasus, and nat urally, its production capacities do not satisfy existing market demand for seedlings. There are three more nurseries in Kakheti, and some household farms that produce seedlings, but they do not follow the seedling production technologies and practices. Good quality seedlings are therefore not produced there, which is the biggest problem of the vine sector, impeding its further development. Kakheti Wine Production Sector - Main Statistical Indicators Export of the Georgian Wines Statistics on wines exported from Kakheti are not available; however, given that around 65–70 percent of the total wines exported from Georgia come from Kakheti, some conclusions can be made based on gen eral national statistics. As seen from Annex 2, Table 2, 2005 was the most successful year for wine export – 59,323,520 bot tles exported, followed by a sharp decline in 2006 to 19,493,219 bottles, and then a further drop in 2007 to 10,155,042 bottles. This decline was due to the embargo on Georgian wines and agriculture products imposed by the Russian Federation. Georgian wine exports to the European Union (EU) and Central and Eastern Asian countries have increased to a cer tain extent in parallel with the Russian embargo of 2005–2007. More detailed data on wine exports showing the dy namics of export markets is given in Annex 2. Domestic Consumption of Georgian Wine No statistics are available on the domestic consump tion of wine. This is largely due to the tradition of home wine-making and consumption, which is not recorded, and which reaches estimated substantive volumes. It is estimated that consumption of domestic wine far exceeds that of export. However, little interest of the wine sector in the domestic market is, on the one hand, due to widespread home wine consumption tradition, and on the other, consumption of falsified wine. Both of these are consumed in large quantities in Georgia and occupy a large segment of the market. Enforce ment of state supervision on food safety is expected to reduce sales of falsified wines, which would open up opportunities for unbottled wines at the domestic market. However, the unbottled wines sector should be prepared to assume quality control enhancement and the expansion of marketing outlets. ANAlySiS of the cURReNt SitUAtioN 21KAKheti ReGioNAl DeveloPmeNt StRAteGy KaKhetI vIne and WIne seCtor – sWot analysIs STRENGTHS WEAKNESSES  Favourable soils and climate for vine growing  Historically established vine microzones  Large areas of vineyards  Existing infrastructure (roads, electricity and gas supply systems, communications, banking sector)  Large experienced labour force  Availability of transportation and agricultural equipment  Availability of wine-processing factories of various sizes and scales  Original traditions and culture of wine and vine  Unique gene fund of the grape varieties  High demand for Georgian wines in the domestic market  High recognition and visibility of Georgian wines in Common wealth of Independent States (CIS) markets  Increasing visibility and recognition of Georgian wines in European and American markets  Lack of a long-term plan for vine growing and wine production development  Lack of a wine cadastre  Fragmentation of primary production plots  Lack of a quality research centre in the region  Gap between research and production  Low level of innovation implementation  Aged vineyards causing low yields  Outdated schemes of vineyard arrangements  Lack of quality planting materials  Lack of nurseries  Mix of various grape varieties on primary production plots  Large areas of hybrid varieties  Outdated agricultural equipment  Limited long-term and cheap credit resources  Lack of a harvest insurance scheme  Outdated equipment and wine containers in the wine factories  Inefficient state control system of wine quality  Large-scale wine falsification  Underdeveloped unbottled wine sales network OPPORTUNITIES THREATS  Development of a national strategy for vine growing and wine production sectors  Setting up of a wine cadastre, providing vineyards with identification docu ments (including name, size, location, grape(s) produced)  Land market development and farm enlargement  Rehabilitation of the Telavi-Vaziani-Tbilisi road  Bringing together research and production  Increased varietal purity in vineyards  Vineyards arrangement according to modern schemes  Setting up of modern nurseries  Upgrading of agriculture equipment  Increased accessibility of cheap and long-term credit resources  Setting up of harvest insurance systems  Setting up of a vine growers’ union  Professional re-training of farmers and establishment of the extension services  Establishment of wine production cooperatives  Increased effectiveness of wine quality control  Development of unbottled wine sales network  Elimination of wine falsification and sales of falsified wine  Investigation of international markets and export expansion  Decreased costs of vine production due to increased yield; price optimi zation and increased competitiveness of Georgian wines  Global economic crisis, inflation  Increased scales of falsification  Climate change in Kakheti due to global warm ing  Vine price increases that reduces competitiveness of wine ANAlySiS of the cURReNt SitUAtioN 22 KAKheti ReGioNAl DeveloPmeNt StRAteGy 5.6 tourism Tourism revitalization in the entire country has sparked tourism in Kakheti. Kakheti certainly has some advantages for attracting both local and in ternational tourists, such as its many historical monuments and potential for developing wine tourism. Tusheti is a special tourism attraction for its unique landscape and nature, as well as its pro tected areas. There has recently been a sharp in crease in small hotels and guesthouses in Tusheti, which makes these areas increasingly attractive to Georgian and foreign tourists. However, the road connecting these areas to Kakheti passes through a complicated landscape, and most of the year, heli copter is the only means of transportation to reach those areas. This obviously limits the number of tourists in these areas. Kakheti protected areas, especially the Vashlovani Reserve, have great potential for ecotourism devel opment. This has particular importance for Dedop listskaro Municipality, which is the most exposed to ecological problems and has the highest poverty rates. The wine tourism concept has recently become popular. Signagi is considered the centre of wine tourism in Kakheti due to its wine traditions, his toric monuments and central location in the region. Many impressive steps have been taken following cooperation of the government and business sector in rehabilitating the historical facades of this town and developing the wine industry. As of 1 August 2007, the total capacity of hotels in support territories of the Vashlovani, Tusheti, Bat sara-Babaneuri and Lagodekhi was only 237 places, which was far below demand. In general, Kakheti Region has the lowest gross and per capita turno ver of hotels and restaurants. The same is true for the growth rate of the hospitality sector. It is most likely that the largest share of visitors to Kakheti come for business and not for tourism. Tourism development will also require investment in train ing and re-training of local staff. tourIsm seCtor – sWot analysIs STRENGTHS WEAKNESSES  Proximity to Tbilisi  Original traditions and culture  Diversity of agricultural products  Rich historical past  Abundance of historic monu ments  Proximity of monuments to the main roads  Diverse and beautiful landscape  Hospitality of local people  Kakheti, as a cradle of wine and centre of winemaking  Limited experience in the hospitality sector  Lack of knowledge in operating tour ism as a business  Deficit of qualified personnel  Underdeveloped tourism infrastruc ture  Georgia’s distance from the devel oped countries  Limited information on Georgia and Kakheti abroad  Peripheral location in Georgia ANAlySiS of the cURReNt SitUAtioN 23KAKheti ReGioNAl DeveloPmeNt StRAteGy 5.7 environmental Considerations Increased frequency of droughts is the most significant environmental concern in Kakheti. This has a negative impact on the desertification processes in the east of the region and the degradation of pastures. As shown by 2000–2006 data, the region suffered heavily from droughts. This often caused a complete loss of harvest (wheat, barley, and sunflower) for households, especially in Dedoplistskaro Municipal ity. During the drought years, the households in creased consumption of livestock products, which in turn sharply reduced the number of animal heads. The inefficient and sometimes lack of an irrigation system as well as state ownership of pastures aggravate the heavy economic and social conditions, which in turn has further negative effects on the ecological situation, as desertified pastures cannot satisfy animal needs. The inability to solve the drought problem might be come the most serious impediment to the socio-eco nomic development of the region. It might also cause the population to migrate from Dedoplistskaro, the bordering municipality, as well as an increase in de forested lands and pastures no longer used for cattle breeding. The collapse of organized farming threatens the tourism industry in the region, as the desertifica tion directly and indirectly would affect the Vashlova ni Reserve, with an increased vulnerable population seeking wood for heating. This in turn would nega tively affect the fauna in the region. In terms of natural resource potential, Kakheti Region and especially its eastern part, have certain advan tages, such as the length and intensity of sunlight in the Dedoplistskaro Municipality. The Kakheti climate therefore provides favourable conditions for alterna tive energy usage. Moreover, there is potential for im tourIsm seCtor – sWot analysIs OPPORTUNITIES THREATS  Construction of new roads/highways  Air connection to Tbilisi and other cities to en able small jet travel  Tourism and recreation potential  Development of a tourism strategy in parallel with sector development  Absorption of new markets (in tourism, wine, handicrafts, etc.)  Development of innovative-alternative sources of energy  Optimization of state information centres and services  Expansion of winter tourism  Revitalization of Georgian festival traditions and various cultural practices  Development of the Kakheti tourist map  Set-up of activities to promote Kakheti as a tourist destination  Increased quality of regionally produced prod ucts  Growth opportunities for internal tourism  Simplified visa regime with neighbouring countries  Transportation problems, outdated railway  Natural hazards  High costs of transportation to Georgia  Heavy traffic in cities and highways  Competition from other touristic zones, within the country and from outside  Lack of tourism information in the munici palities  Unexplored wine tourism, eco-tourism and adventurous tourism  Underdeveloped hotels and restaurant sec tors  Unprepared and insufficient tourist industry personnel  Weak marketing of regional hotels  Limited capacities for tourist accommodation; limited choice of hotels and guesthouses  Underdeveloped signage system for the tour ism infrastructure (billboards, trademarks and /brand identity signs); lack of signs in English (street names, information on hotels, etc.)  Lack of a tourism and recreation programme in the municipalities ANAlySiS of the cURReNt SitUAtioN 24 KAKheti ReGioNAl DeveloPmeNt StRAteGy plementing pilot projects on growing plantation trees, which might provide some compensation to the popu lation for agriculture stagnation. Other problems in Kakheti Region are accessibility of drinking water and its contamination. Safe use of re sidual pesticides is yet another problem, such as in Sa kobo village of the Signagi Municipality. As a result, these contaminants are seeping into the rivers, which cause serious risks for the population and children. Uncontrolled use of forest resources, especially at the foothills of the Caucasus Mountains, has increased the risks of floods. This is especially true of the Alazani River Basin, where severe results are already felt – ag riculture lands have become marshland, and the wide spread of pests is threatening public health. In addi tion, local biodiversity is under threat. The problem of garbage collection and use is another severe problem in the region. Commercial processing of garbage seems unrealistic in the near future, requir ing active involvement of government and donor com munity in solving this problem. Resolving the problem of Duruji River in Kvareli Mu nicipality is yet another challenge in the region. Here, the riverbank support projects must be financed from the central budget, to lift the risk of floods that have occurred for decades. envIronmental seCtor – sWot analysIs STRENGTHS WEAKNESSES  Favourable climate and fertile soils  Existing infrastructure: roads, irrigation, gas and electricity supply networks  Interest of the regional government and local self-governance in environmental issues  Regular supply of electricity  Improved organization of garbage collection  Interest of the local population in environ mental issues  Support from the Ministry of Environmental Protection and Natural Resources  Potential for tourism development  Possibility of using flood residues for con struction and road building materials  Long hours of sunlight in the eastern part of the region  Biodiversity and vast areas of protected areas  Limited funding  Non-existence of modern-type of garbage col lection centres  Limited availability of needed equipment  Lack of qualified personnel and specialists  Low level of business development  Low level of the culture of environmental pro tection  Lack of experience in carrying out environ mental works  Unsatisfactory state of the water supply net works and water supply headworks in some of the villages and towns  Irrigation water problems and the poor state of the irrigation system infrastructure  Limited availability of existing and needed spe cial equipment OPPORTUNITIES THREATS  Development of infrastructure  Development of the processing industry  Monitoring of pesticides storage  Collection of garbage in special containers and their removal  Potential for developing the construction industry  Potential deterioration of the economic situa tion  Difficulty with finding ANAlySiS of the cURReNt SitUAtioN 25KAKheti ReGioNAl DeveloPmeNt StRAteGy 6.1 physical and geographical environment Compared to other regions in the country, Kakheti has the largest agriculture land per capita and the best quality land. Further, the settlement pattern of the population, i.e. the vast majority of the population living across the main highways, creates favourable conditions for effec tive commercial and public infrastructure development. The proximity of the region to Azerbaijan has not been developed into a comparative advantage for the region, although there is potential to stimulate Kakheti’s eco nomic development as economic integration of the two countries grows. Diverse nature and state-protected territories create good conditions for tourism development. 6.2 agriculture Kakheti is the Georgian region with the largest amount of total agricultural land, as well as of some categories of the agricultural land (e.g. arable, pastures and meadows, land under perennials, etc.). Abundance of agricultural land largely determines the region’s leading role in Geor gian agriculture. Kakheti is also top producer of various agricultural crops such as wheat, sunflower, peaches, strawberries, peanuts, watermelon, wool, honey and mutton, and one of the leaders in the production of bar ley, corn, vegetables, fruits, beef and pork, milk, poultry and eggs. In addition to availability of agricultural lands, Kakheti’s vast potential in agriculture is also determined by its favourable soil and climatic conditions, the accessi bility and availability of its labour force, and its irrigation and road infrastructure. Competitiveness of the Kakheti Region in agriculture is apparent in viticulture and wine production. This is due to large areas of productive vineyards, soil and climatic conditions, the long-standing tradition of grape grow ing and wine production, a network of wine-producing factories, and well-known brands of Kakheti wines based on Kakheti appellations. Kakheti is the leading region in the country in quantities of grapes and wines produced, as well as quality. Therefore, in the future, this sector will continue its strategic importance for the region. Since agriculture is one of the main strengths of the local econ omy, special attention is needed to further develop this sector, including the establishment of sustainable exten sion services and access to credit. 6.3 physical Infrastructure The peripheral location of the Kakheti Region is com pensated by the satisfactory state of its highway infra structure connecting the region to the capital. In the recent past, the region had well-developed and well-functioning irrigation systems. Despite the fact that this infrastructure is currently largely outdated and even degraded, it is still possible to keep it operational, which would greatly facilitate increasing agriculture production in the region. 6.4 The labour force A large and relatively cheap labour force is yet another factor distinguishing Kakheti from other regions in the country. This advantage would gain huge importance if the region increases its agriculture production and de velops its food processing industry, since according to economic profile of the region, most of the population is experienced and skilled in these areas. The fact that the average village size in Kakheti by far ex ceeds that of the rest of Georgia places it in a better posi tion for setting up small-scale processing facilities in the villages, thus creating local employment opportunities. 6.5 tourism Kakheti is well positioned for developing tourism due to its unique natural resources. It is famous for its rich col lection of historic-cultural monuments, sites and ruins, as well as protected areas such as Vashlovani, Tusheti, Batsara-Babaneuri and Lagodekhi Reserves. These create favourable conditions for turning Kakheti into an impor tant centre of eco- and adventurous tourism. Agrotour ism is also progressing, naturally focusing on wine tour ism. Recent investment in, and government-supported 6. ASSESSMENT OF THE COMPETITIVENESS OF THE REGION ASSeSSmeNt of the comPetitiveNeSS of the ReGioN 26 KAKheti ReGioNAl DeveloPmeNt StRAteGy large-scale works for, rehabilitating the historical herit age of the region would facilitate tourism development in the region. 6.6 other sectors of the economy Kakheti is comparatively weak in the areas of indus try, transport and construction. It has limited reserves of mineral resources, although current stocks of build ing materials definitely merits attention. Their success ful use will largely depend on the ability of its economy to expand and develop its leading agriculture and food processing sectors, among others. Marble is the special resource of the region. Timber processing might be a growing opportunity for the northwestern part of the region, where this sector is slowly developing. The peripheral location of the region and its common border with Azerbaijan and the Russian Federation might be turned into a competitive advantage in the long term. However, the current impact of this factor on economic development of the region is marginal and no major changes are expected in the short term. 7.1 labour market, education and healthcare Consideration of these three areas in an integrated manner is motivated by the fact that they are interre lated and fall within the competences of the National Government. Thus, even taking into account regional specifications of Kakheti’s economy, geography or so cial environment, it is almost impossible to have a full understanding of the situation regulating healthcare, education and labour market. Recent changes and modifications in the methodolo gies for calculating the poverty rate, its depth and se verity prioritize the issue of defining these parameters for the Kakheti Region. Measures undertaken by the government for poverty reduction would largely de fine the extent to which the labour force in the region would be prepared to meet the labour market demand, and how accessible and efficient healthcare and educa tion services would be to the population. The state of development of the primary healthcare and education systems directly reflects on the local la bour force in the market economy conditions. After implementation of the economic diversification plan of the region, the entire population should have access to primary healthcare. The region must have professional training and re training centres, which would prepare the labour force for the changing economy, based on the current needs and labour market demand such as agriculture, food processing, and tourism specialists. 7.2 sectoral structure of the economy and eco nomic growth Analysis of the development of the Kakheti econo my over the last few years suggests that stimulating large-scale, positive results in the short term would be complicated due to the current labour market situation. This parameter would be least affected by changes in the social and economic environment in the short and medium term. A breakthrough in eco nomic development will be achieved only if the re gion experiences a high inflow of investments, both foreign and domestic. In the short term, the trends of trade and tourism de velopment appear sustainable, which could be further enhanced following the rehabilitation of the highway through Gombori Pass. New perspectives of the Ka kheti Region might also be opened up if the region 7. REGIONAL DEVELOPMENT PERSPECTIVES AND TRENDS ReGioNAl DeveloPmeNt PeRSPectiveS AND tReNDS 27KAKheti ReGioNAl DeveloPmeNt StRAteGy in particular and Georgia in general are able to take advantage of increased world food prices. In the meantime, a solid foundation should be made for developing tourism, transport, industry, construc tion and services, as the economy cannot be solely de pendent on agriculture. In general, the most reliable road map for Kakheti economic development and pov erty reduction is as follows: investment in infrastruc ture; investment in the processing industry; increased efficiency and productivity in agriculture; increasing exports; increasing incomes; diversifying the economy in favour of tourism and other tertiary sectors. 7.3 agriculture and viticulture Today, agriculture remains the main source of income for Kakheti’s population, a situation that will most likely remain in the future. The important task of this sector is to increase efficiency and profitability, and expand markets both within the country and interna tionally. This would require improvements in the pro duction processes, the introduction of quality control systems at every stage of the production chain, devel opment of cooperation among farmers and between farmers and wine makers, market segmentation and targeted supply of production. Diversification of economy would generate alternative employment opportunities to absorb the surplus labour from the agriculture sector. In addition, people with in come from other sectors of the economy would gradually abandon agriculture, which would lead to enlarging agri cultural plots and land market development. Larger farms in turn would be more flexible in responding to market demand in terms of quality and types of products. Enforcement of food safety legislation in the country would reduce wine falsification and free up a signifi cant segment of the domestic wine market. Quality control of the unbottled wine and development of its sales network would significantly increase the impor tance of the domestic wine market and expand income opportunities for the wine sector. 7.4 tourism Tourism potential is expected to expand significantly over the medium term, which would be just a begin ning for attracting international tourists. Large-scale government and private sector investment in reha bilitating Signagi and possibly Telavi infrastructure would play an important role in developing short tours from Tbilisi. Tourism is expected to become a main source of income for the population, together with agriculture. With respect to tourism opportunities in Kakheti Re gion, it should be pointed out that tourism opportu nities in Kakheti are limited and concentrated in the Signagi-Telavi area direction. There is also some po tential, though underused and fragmented, in Tusheti and Lagodekhi and Vashlovani Reserves. 7.5 environmental Considerations By the time of the completion of the Kakheti economic diversification plan, Kakheti should remain a safe place to live, though economic development and environ mental protection are by definition conflicting tasks. Attainment of a higher economic growth rate, primarily fuelled by agriculture and food processing, would in crease pressure on the natural resources, calling for their protection. This is especially true when considering the global picture, with tourism becoming an important sector of the economy, since its development largely depends on the availability of natural resources. Most of the region’s environmental problems can be decided at the national level only. The most severe problem that could be singled out in this regard is the removal of outdated pesticides, which calls for actions by the central government and experts. The central government must have some responsibil ity in floods prevention, especially given the limited financial resources of the local self-governments. The problem of droughts is expected to become more severe with global warming. Rapid rehabilitation of the irrigation infrastructure would mitigate this prob lem for the region. The long hours of sunlight open up new opportunities for the region to develop alternative sources of energy. It might also be an opportunity to take land that is no longer used for agriculture and use it for plantation forests. Preservation of the biodiversity has potential for tourism sector development. ReGioNAl DeveloPmeNt PeRSPectiveS AND tReNDS 28 KAKheti ReGioNAl DeveloPmeNt StRAteGy Below are the sector priorities that should be at the top of the development agenda for the coming five-year pe riod. Appropriate consideration should be given to the fact that some of the identified priority activities, due to their scale and nature, are directly linked with the plans of the central government. For example, Telavi Vaziani-Tbilisi Highway rehabilitation, given its scale and importance, is financed from the state budget; this project would have the biggest impact on the Kakheti Region and its economy. When listing the Telavi Vaziani-Tbilisi Highway or any similar project as a pri ority, due consideration should therefore be given to national priorities, so that needs of the Kakheti Region are closely aligned to them. The same is true for the other infrastructure projects, such as irrigation, which cannot be financed from regional funds alone. 8.1 labour market, education, healthcare and oth er social Issues Strategic objectives and priorities of doctors’ training are similar to those across the country. The healthcare and education systems should be set up in order to allow the government to overcome poverty within an optimal time frame. Development of education is directly linked to that of the labour market structure, according to the qualifi cations and skills of the working force. It is unlikely that in the short term Kakheti will have an adequate work force and qualified managerial human resources. Together with the ongoing reforms in healthcare and education, it is important to develop capacities for providing skills training in agriculture, processing and tourism. priority directions: 1. Conducting a detailed study of the region’s socio economic indicators; identifying priorities based on the results of the study; assessing adequate lev els of funding and attracting funding. 2. Identifying region’s poverty parameters and devel opment of a plan for overcoming poverty; 3. Identifying the roles of the central and local gov ernments, as well as international donors and the private sector in poverty reduction. 4. Assessing the needs of the region in vocational educa tion and forecasting the profile and determining the number of vocational education centres needed. 8.2 regional economy (excluding agriculture and tourism) The peripheral geographic location of the Kakheti Region impedes its development. Economic relations with neighbours – the Russian Federation and Azerba ijan – are almost non-existent. Turning Kakheti into a main highway to Azerbaijan would accelerate economic development in the region. Rehabilitation of the Telavi-Vaziani-Tbilisi Highway would ease access to the capital and increase the cargo turnover, which in turn would facilitate development of transportation and communication in the region, as well as create grounds for industry rehabilitation. Development of the construction sector and encour agement of the use of local construction materials in infrastructure projects are priorities, as well as the commercial use of the Lopoti Marble Reserve. Development of commercial infrastructure as the main basis for economic development is of paramount importance. This involves developing the urban life style in order to attract businesses and facilitate inflow of capital to Kakheti. priority directions: 1. Rehabilitating irrigation systems. 2. Gradually privatizating irrigation systems (carry ing out technical economic assessments, evaluating privatization schemes). 8. SECTOR DEVELOPMENT PRIORITIES FOR THE KAKHETI REGION SectoR DeveloPmeNt PRioRitieS foR the KAKheti ReGioN 29KAKheti ReGioNAl DeveloPmeNt StRAteGy 3. Maintaining local transport roads in an operation al state. 4. Providing technical assessment of the rehabilita tion works of Telavi-Vaziani-Tbilisi Highway. 5. Rehabilitating main infrastructure facilities in set tlements, with special focus on water supply sys tems. 8.3 agriculture and the Wine sector Kakheti is a region with vast agricultural potential, having large areas of fertile agricultural land, natural and human resources, agricultural equipment, peren nials crops, livestock and processing facilities. Most of the region is covered with roads and electric trans mission lines, as well as necessary infrastructure for natural gas supply and irrigation. All of these create favourable conditions for further development of agri culture in the region. Natural conditions in Kakheti allow for diverse ag ricultural production. During Soviet times, priority was given to animal husbandry, cereals production and viticulture. Today, these sectors retain their im portance in the economy of the region; however, their relevance should be assessed according to current mar ket economy conditions. When considering regional development perspectives, the following should be taken into account: • Export of agricultural products from Kakheti re gion is complicated due to a number of economic and political factors. • The domestic market is increasingly occupied by imported products. • The poverty level remains high in Kakheti. Given these circumstances, Kakheti agricultural devel opment priorities should be in line with the following directions: (i) Priority for the short- and medium-term perspec tive should be given to meeting domestic mar ket demand and import substitution. This is es pecially relevant in the environment when, due to price liberalization and current tariff policy, agricultural products prices in Georgian domes tic market are equal to those in the international market. (ii) More attention should be given to the production of higher-value and higher productivity products that would increase incomes and reduce pover ty. Here, the government would have a critical role to play, for instance, in rehabilitating and upgrading infrastructure including irrigation systems rehabilitation and their expansion, road construction and maintenance, further gasifica tion, setting up agriculture advisory services, among others. (iii) The expansion of the irrigation infrastructure net work in the region would have a critical role in increasing agricultural potential and incomes due to the following factors: (a) Irrigated areas would allow for increased produc tivity and profitability of crops, among which wheat and sunflower are the most important, since they have greater potential to substitute the imported products. (b) Irrigated areas would allow for diversification of crops, with a gradual switch to higher-value crops (corn, vegetables, melons, fruits). This would contribute to import reduction and enhance in comes. (c) Increased accessibility of irrigation water would substantively mitigate risks of harvest loss during droughts, which occurs frequently in Kakheti’s non-irrigated areas. Mitigation of this production risk would be an important re sponse for the low- income population of the region. Expansion of agricultural land, an increase in the number of producers, and establishment of farmers’ cooperatives in production and marketing should be encouraged to attain increased efficiency of ag ricultural production. This would require support from the government, both in financial incentives and regulatory frameworks. The current taxation system favours farm fragmentation, as only small producers whose turnover is below GEL100,000 are VAT-free. Investment in agriculture will be encouraged if reinvested funds are exempt from profit tax. Support of large agricultural produc ers and cooperatives by reducing taxation of large agricultural producers and financial mechanisms (e.g. low interest rate loans) and technical meas ures (e.g. set-up of agricultural extension services and veterinary services) will facilitate an increase in number of producers and efficiency, as well as ensure profitability of agricultural production in the region. SectoR DeveloPmeNt PRioRitieS foR the KAKheti ReGioN 30 KAKheti ReGioNAl DeveloPmeNt StRAteGy priority directions: a) Grape production and Wine Production General 1. Developing the wine sector development strat egy. 2. Developing the wine cadastre. 3. Conducting market research internationally for studying current and potential markets for Georgian wines. 4. Promoting Georgian wines internationally through advertising campaigns in magazines, newspapers, brochures, tourist booklets and in ternet sites. 5. Constructing the new Telavi-Vaziani-Tbilisi Highway. 6. Promoting wine tourism. State Sector 1. Making the Food Safety Service operational. 2. Fine-tuning and creating the wine quality con trol system. 3. Providing support to economic cooperation of Kakheti and its twin regions (from France, Ukraine, etc.). Education/Research 1. Modernizing wine and viticulture depart ment at Iakob Gogebashvili Telavi State Uni versity. 2. Setting up a Marketing Research Centre. 3. Conducting a survey of domestic and export markets. 4. Bringing together research and production Grape Production 1. Establishing modern nurseries for collection varieties, as well as other high-quality planting material for grapes. 2. Implementing and extending modern schemes and technologies in new vineyards. 3. Setting up modern extension services for grape producers within the higher and vocational ed ucation institutions. 4. Increasing the area of vineyards of traditional Kakhetian grape varieties: Kisi, Khikhvi, Ka khuri Mtsvane, Mcvivani, and Rkatsiteli. 5. Promoting grape producers’ associations and unions. Wine Production 1. Conducting a survey on the domestic market and its segmentation. 2. Promoting cooperative wine-making. 3. Implementing effective wine quality con trol. 4. Limiting sales of falsified wine at the domestic market. 5. Developing the sales network for quality bulk wine at the domestic market. 6. Establishment of contract relationships in ad vance between grape growers, who are mostly ordinary farmers, and wine producers. b) Agriculture 1. Developing the National Strategy for Agricul ture Development. 2. Expanding the irrigation network. 3. Enforcing veterinary control and provision of veterinary services. 4. Enforcing food safety services. 5. Setting up agriculture extension services with in higher and vocational education institu tions. 6. Ensuring accessibility of quality seed and plant ing materials. 8.4 tourism Kakheti’s potential as the centre of Georgian agrar ian tradition and the cradle of wine should become an important tourist attraction. Plans for rehabilitating the highway from Telavi to Tbilisi is of strategic im portance. Equally important is to strengthen Telavi’s position as the cultural and economic centre of the region. SectoR DeveloPmeNt PRioRitieS foR the KAKheti ReGioN 31KAKheti ReGioNAl DeveloPmeNt StRAteGy At the initial stage, Kakheti’s tourism industry should target tourism from its own region and from neighbouring countries. Government and staff of Georgian diplomatic services abroad should promote Kakheti through information campaigns. Relations with donor communities should be strengthened in order to fully exploit this source to target potential tourists. It is important to further support activities for re habilitating and maintaining cultural and historic monuments. Kakheti tourism development concept and strategic plan need to be developed, which would include a plan for maintaining monuments. Active involvement of the government and the in troduction of standards in the tourism sector would encourage competitive environment. In addition, in clusion of tourism professions in education system reform would enhance the region’s opportunities for attracting tourists. The government also has a role to play in ensuring that the tourism industry does not threaten the image of Kakheti as an agrarian region and that its unique traditions are preserved. 8.5 environmental Considerations With regard to the environment, from the perspec tive of regional development, the following needs to be taken into account: 1. Priority attention should be given to the most ur gent problems (see below) that might impact on the economic development of the region and on human health in the short run. 2. The local government needs to take more respon sibility in solving less urgent environmental prob lems. The rapid removal of outdated pesticides is one of the most urgent problems calling for immediate solu tions. This is not a strategic direction but rather, a single task, and once completed and relevant regula tions enforced, the problem will be overcome. Strategic direction is ensuring provision of drinking water to the population and its quality assurance, the results of both of which correlate with poverty reduc tion. Another priority direction is, at the minimum, partial rehabilitation of irrigation networks. It would miti gate the risks of negative effects of droughts, which cause some land plots to no longer be used for agri cultural production, protect biodiversity and prevent border regions from depopulation. In addition, it has a critical role in facilitating economic development, since access to irrigation means higher agricultural productivity and yields. Flood protection is yet another problem faced by the region; clearing of dry canals from residues is a prior ity direction. The same is true of the Alazani River Basin, where marsh formation is reaching alarm ing rates. The central government needs to develop schemes that would encourage the use of locally available construction materials for infrastructure projects. Since the local self-government is in the best posi tion for better resource management, its role and responsibility should be increased in the areas of garbage collection, new sources of energy and bio diversity protection. For example, part of the land tax could be used for improving the towns’ appear ance. Ways of cooperating with businesses and interna tional donors should be explored with respect to cur rent capacities for alternative energy usage. Priority Directions: 1. Planning effective measures against desertifica tion of the eastern part of the Kakheti Region (re habilitation of irrigation; technical and economic assessment on setting up wind breaks and forest plantations; studies carried out on the use of solar energy, etc.). 2. Preventing uncontrolled usage of the forest resources for the Caucasian foothills and seek ing funding for Duruji River bank reconstruc tion. 3. Ensuring quality control of drinking water. 4. Organizing garbage collection and setting up a garbage collection centre. SectoR DeveloPmeNt PRioRitieS foR the KAKheti ReGioN 32 KAKheti ReGioNAl DeveloPmeNt StRAteGy As seen from the analysis of sector priorities, many issues require urgent intervention and effective reso lution. However, as reality shows, due to the limited financial, technical and labour resources, all of these issues cannot be resolved at once. It is important, therefore, to select the most critical priorities that could realistically be resolved within the time horizon covered by the strategy. Having analysed all the above priority directions, the Regional Development Committee has agreed on the following five main priorities directions: 1. Setting up food processing enterprises Processing of fruits and vegetables; setting up milk collection centres and cheese and butter production plants; ensuring accessibility of financial resources (low interest rate and subsidized loans, grants) for small entrepreneurs. 2. Supporting agriculture development: Supporting the wine and vine sectors, organizing agricultural extension services, facilitating farmers’ cooperation, providing support to the animal hus bandry sector (breed improvement, feed produc tion, veterinary services, among others). 3. Improving the provision of drinking water to the population: Improving the quality of the physical infrastructure, installing new water supply networks and water quality control. 4. Developing tourism: • Improving the tourism infrastructure: signage, sanitary points, local roads. • Improving the quality of tourist services; popu larizing the region, setting up tourism informa tion centres, developing tourist maps. • Supporting professional education: training of guides and other specialized personnel in the tourism industry. • Ensuring access to financial resources on afford able terms (subsidized loans, grants) for start ups in the tourism business (guesthouses, tour operators). • Ensuring preservation and protection of cultural and historical monuments. 5. Collecting garbage and managing waste: Arranging special landfills, conducting a feasibility study on setting up garbage collection plants, as well as on various alternatives for garbage collection and management. Having identified these five main priority directions, it is desirable that the government, donors and other stakeholders target and consult them when planning various development programmes or projects in Ka kheti Region. 9. KAKHETI REGIONAL DEVELOPMENT PRIORITIES FOR 2009-2014 KAKheti ReGioNAl DeveloPmeNt PRioRitieS foR 2009-2014 33KAKheti ReGioNAl DeveloPmeNt StRAteGy GROUP OF ExPERTS Vladimir Mikhalev Beka Tagauri Lasha Dolidze Ana Godabrelidze Konstantine Kobakhidze Nino Romashvili Soso Mikeladze WORKING GROUPS agrICulture and WIne seCtors David Tamarashvili – Group Leader InfrastruCture and other seCtors of eConomy Soso Mikeladze – Group Leader Giorgi Barisashvili Jumber Batiashvili Levan Gamsakhurdia Bejan Giorganashvili Giorgi Dakishvili Goga Tevzadze Temur Lamazoshvili David Maisuradze Zurab Ramazashvili Levan Sasurkinashvili Shakro Terterashvili Neli Gobejishvili Aleksi Tegerashvili Khatuna Mamulashvili Kote Makhatelashvili Vaja Naskidashvili Irina Turashvili Guram Turashvili Tiniko Khanjaliashvili Nana Kokiashvili Julia Dzamukashvili Zurab Charbadze Maia Tsignadze Water, envIronment and Waste management Tinatin Sibashvili – Group Leader soCIal proteCtIon Issues, eduCatIon, healthCare Tinatin Zurabishvili – Group Leader Kakhi Gemazashvili Ivane Grdzelashvili Gela Tetrauli Zaza Lomidze Laura Kharitonashvili Malkhaz Khabarashvili Nana Aleksishvili Maia Elizbarashvili Nino Kakhashvili Nodar Latibashvili Sopio Mandzulashvili-Kharebava Zaza Pirosmanishvili Neli Khizanishvili Tinatin Javakhishvili Gocha Shavgulidze Giorgi Chonishvili MEMBERS OF THE REGIONAL DEVELOPMENT COMMITTEE George Sibashvili First Deputy of the Governor of Kakheti Region Zurab Butskhrikidze Head of Telavi Municipality Koba Maisuradze Head of Akhmeta Municipality KAKheti ReGioNAl DeveloPmeNt PRioRitieS foR 2009-2014 34 KAKheti ReGioNAl DeveloPmeNt StRAteGy Kakha Labuchidze Head of Gurjaani Municipality Gia Gozalishvili Head Lagodekhi Municipality Gia Chalatashvili Head of Sagarejo Municipality Zaza Zedelashvili Head of Signagi Municipality Levan Bagashvili Head of Dedoplistskaro Municipality Koba Burkiashvili Head of Kvareli Municipality Levan Rostomashvili Center for Strategic Research and Development Kakha Gemazashvili NGO Telavi Information Center Kote Makhatelashvili Director, Telavi Consulting Gela Gamtkiculashvili Entrepreneur, Tkupebis Old Marani Ltd. Inga Kibrotsashvili NGO, CHF International, Economic Development Officer Tamaz Konchoshvili Entrepreneur, Corporation Kindzmarauli Ltd. Goderdzi Gonashvili Entrepreneur, Gvinov Kakhuro Gonashvilisa Ltd. Valeri Gremelashvili Kakheti Regional Development Agency, Director Irma Kuprashvili Urban Institute, Coordinator in Kakheti Region Vakhtang Piranishvili UNDP, Kakheti Regional Development Project Manager THE UNDP TEAM: Sophie Kemkhadze Assistant Resident Representative, UNDP Georgia George Nanobashvili Economic Development Team Leader, UNDP Georgia Vakhtang Piranishvili UNDP KRDP Manager Tamar Zurabishvili KRDP Regional Development Specialist Tiniko Khanjaliashvili KRDP Finance and Administrative Assistant KAKheti ReGioNAl DeveloPmeNt PRioRitieS foR 2009-2014 35KAKheti ReGioNAl DeveloPmeNt StRAteGy Ensuring a high level of participation in the RDS process is critical so that it can reflect the real problems of those living in the region, as well as their vision and develop ment priorities. It is equally important to streamline the RDS development process with well-developed method ologies based on participatory principles. To achieve these objectives, the Kakheti Regional De velopment Project invited an international consultant of the UNDP Bratislava Regional Centre, Mr. Vladimir Mikhalev. During his two missions to Kakheti Region, Mr. Mikhalev met with the heads of the regional and mu nicipal administrations, NGOs active in the region as well as representatives of the business sector, the educational system and media, among other stakeholders. Following these meetings and consultations, the principles, main ap proaches and methodology for the RDS were developed, which are in compliance with UNDP guidelines and prin ciples for the development of regional plans. The developed methodology is based on the main princi ples followed in the development of KRDS: Regional planning is a participatory, consultative proc ess, which includes all stakeholders:  The Administration of the Governor  The municipalities  Local civil society institutions  Business sector representatives  Educational institutions  Mass media  Citizens of the region The process should not be viewed as a one-time exer cise, but rather as dynamic and flexible, able to reflect new realities of regional developments. Full advantage should be taken of building on lessons learned in regional planning elsewhere in the world (e.g. Eeastern Europe, Ukraine), where various re gional development programmes are now being imple mented. It is also important to build on accumulated experience in the country and on available resources. The development of the RDS should be tailored to the specifics of the region and take into account such im portant factors as:  potential for economic diversification of the region;  assessment of the competitiveness of the region;  SWOT analyses of the region. KRDS should be oriented on the results and be fo cused on solving social issues. Setting of realistic objectives based on SMART crite ria, i.e. the tasks and the vision should be:  Specific,  Measurable,  Affordable,  Realistic and Relevant  Time-bound. The following factors should also be taken into ac count when working on the RDS:  Only realistic and feasible programmes and projects should be reviewed; all unrealistic visions should be excluded.  The RDS should be linked and in line with the pri orities set by the Basic Data and Directions Docu ment of the Government of Georgia.  The RDS should take into account the available budgetary resources and external funding.  A concrete action plan needs to be developed after the priority directions are set and approved. The regional development Committee Following the development of the principles and method ology for the RDS, and based on the consultations with the KRDP and other stakeholders, Mr. Mikhalev devel oped a plan of action for RDS development, which ad vised on the establishment of the Regional Development Committee (RDC). The RDC is composed of representa tives of the main agencies and organizations active in the Kakheti Region, including those from the Administration of the Governor in Kakheti Region, municipalities, local businesses, educational and civil society institutions. ANNEx 1 Methodology, Principles and the Participatory Process of the development of the Regional Development Strategy (RDS) ANNex 1. methodology, Principles and the Participatory Process of the development of the Regional Development Strategy (RDS) 36 KAKheti ReGioNAl DeveloPmeNt StRAteGy The RDC first met on 13 February 2007, having decided that, in general, the Committee would be chaired by the First Deputy Governor, who was tasked to supervise and coordinate the strategy development process and set up Working Groups. The main task of the RDC was the co ordination of the RDS process together with defining the vision and main priority directions based on stakeholder consultations. The RDC also supervised activities of the Working Groups, reviewed concrete sectoral objectives and reflected them in the strategy. (The Working Groups are discussed in detail in the next section.) In addition, the RDC was made responsible for reviewing the final version of the KRDS and its approval. Working groups The main purpose of the Working Groups was to provide in-depth sectoral analysis with a focus on strategic directions and priorities. It was decided that the Working Groups would be specialized in the following sectors, corresponding to key development priorities of the Kakheti Region: 1. Food, agriculture and wine, covering agricultural pro duction, agro-processing industry, viticulture, and agro-exports. 2. Other sectors of economy and infrastructure, including the manufacturing industry, infrastructure, tourism and other services with special emphasis on small- and medi um-sized enterprises (SME) support and development. 3. Water and environment, including water resources protection, irrigation, drinking water supply, sanita tion, solid waste management and all issues of environ mental protection. 4. The social sector, including education, healthcare, so cial protection and social services. Representatives of the Administration of the Governor in Kakheti Region, municipalities, as well as business and non-government institutions formed the four Working Groups. Each Working Group was asked to participate in the development of sectoral inputs for the RDS in view of and based on discussions on the region’s main priorities. Each Working Group was facilitated by a Group Leader, who was hired by KRDP to assist the Working Group members in finalizing their inputs to the strategy. At the same time, the Group Leaders were asked to support the Working Groups in obtaining data, carrying out analysis, identifying problems and setting tasks. Working Groups started their activities with an orienta tion meeting, where the RDS’s main principles, objec tives, time frame and methodology were presented. Also, tasks were divided among the Working Group members and the meetings schedule agreed. The KRDP was actively involved in Working Group meet ings, monitoring progress made by the Working Groups, holding regular meetings with Group Leaders, assisting in the coordination within the Working Groups, and con tributing to the effective and fruitful review of cross-secto ral problems and priorities. It is important to note that each of the four Working Groups developed its own working strategy, tailored to their sector specificities. The number of Working Group members also varied between groups, although the mini mum was five. All Working Groups had: • a Group Leader – leading expert-facilitator, provided by the KRDP; • experts from another relevant government entity or business sector; • representatives of the municipalities; • representatives of civil society institutions and com munity support organizations; Special attention was given to maintaining the balance of gender and of government/non-government organizations. Given the specificities of the work, different Working Groups met at different intervals. They succeeded in: • closely cooperating with the KRDP; • participating in public discussions to familiarize vari ous institutions and communities with the strategic planning process; • working in coordination with the RDC and other Working Groups; • performing tasks as set at the Working Group meetings. Working Group meetings took place from February to mid-April 2008. Working Groups did not work in isola tion from each other, but in cooperation, to ensure a uni fied approach to the RDS. Also, they worked throughout the entire period of KRDS development. Guidelines for Participatory Economic Planning, devel oped by the Urban Institute, were heavily consulted while working on the KRDS. At the same time, the Working Groups benefitted from Municipality Economic Develop ment Plans. By January 2008, the United States Agency for International Development (USAID)-funded Urban Institute Project helped all eight municipalities in Kakheti Region (Akhmeta, Dedoplistskaro, Signagi, Kvareli, Te ANNex 1. methodology, Principles and the Participatory Process of the development of the Regional Development Strategy (RDS) 37KAKheti ReGioNAl DeveloPmeNt StRAteGy lavi, Gurjaani, Lagodekhi, Sagarejo) to finalize these plans. Almost all departments of the municipal governments were involved in the process, which was implemented in five stages: (i) participatory economic development planning; (ii) data collection; (iii) analysis and assessment; (iv) ac tion plan development; and (v) adoption of the economic development plan and monitoring of its implementation. With support of municipal planning groups, a SWOT analysis was developed for each municipality, priorities identified, competitive sectors and available resources ear marked, and goals and tasks set with time frames for each of the priorities. Economic development plans for all eight municipalities of the Kakheti Region were then set, which largely facilitated the RDS process. Concerning the strategy process, each Working Group and its Group Leaders were free in their decisions, although all of them were aware of the importance of the participatory process, which implies thorough analysis of public needs and available resources, and of transparent implementa tion. The Working Groups focused on the most urgent problems and needs, and targeted resources in order to achieve feasible goals. At the same time, they performed an analysis of the demographic situation and trends, the state of Kakheti’s infrastructure, economic competitiveness, the financial status of the people living in, and businesses op erating in the region, the quality of life, and formulated a vision for their sector development. After all the above had been undertaken, each Working Group provided sector inputs for the KRDS. Compilation of the strategy document After the Working Groups had developed sectoral strate gies, the KRDP once again organized the mission of Mr. Mikhalev, who met with the Working Group Leaders, discussed their inputs to the RDS and advised on hiring consultants to formulate the final strategy based on the in puts provided by the Working Groups, various studies on Kakheti Region, statistical information, sectoral strategies prepared by the line ministries, priorities set in the Basic Data and Directions Document, and all other documents that contained materials relevant to the region. Due con sideration was given to the difficulties caused by the lack or limited availability of statistical data and information, and in many cases, their unreliability. Two external consultants were asked to assist the Admin istration and the Regional Development Committee in consolidating all of the inputs into a unified document. Consultants, together with the RDC, also carried out a competitiveness analysis of the Kakheti Region and devel oped a vision and a set of priorities for the next five years. The public Consultation process of the regional de velopment strategy After the draft KRDS was ready, it was presented for pub lic discussion and review to allow the incorporation of comments and suggestions from all stakeholders. KRDP, together with RDA, organized a number of meetings where all interested parties – representatives from the gov ernment, public and educational institutions, local busi nesses, farmers, media and others – were invited to com ment on the draft strategy document, which were later reflected in the final version of the document. The final KRDS was adopted by the RDC in July 2008 at the Council meeting, where the RDC also adopted the vision and the five main priorities of the Kakheti Develop ment Plan for the next five years. Principles of KRDS Implementation:  Strategy implementation is the responsibility of the Administration of the Governor in Kakheti Region and its Regional Development Unit.  The KRDS is in line with the Basic Data and Direc tions Document (BDD) 2009–2012.  The Administration of the Governor and the RDA must translate the outlined priorities into concrete projects and initiatives. The KRDS must be updated and adjusted to new realities as needed.  The RDA must facilitate KRDS implementation by: • facilitating data collection on the Kakheti Region, with continuous updating and analysis; • attracting investors to Kakheti Region and sup porting their activities; • designing concrete project proposals and action plans according to the priorities identified in the KRDS, and presenting them to donors and other interested parties; • seeking budgetary funding for supporting KRDS priorities, together with the Administration of the Governor in Kakheti Region; • facilitating the municipal planning process in the Kakheti Region municipalities, ensuring their quality and methodological requirements and consistency with the KRDS and national priorities. ANNex 1. methodology, Principles and the Participatory Process of the development of the Regional Development Strategy (RDS) 38 KAKheti ReGioNAl DeveloPmeNt StRAteGy ANNEx 2 Statistical information on the wine sector in Kakheti, 2007 TABLE 1. GRAPE VARIETIES AND AVERAGE YIELD, 2007 Kakheti municipalities akhmeta gurjaani dedoplis. telavi lagodekhi sagarejo signagi Kvareli total vineyards, ha 1,747 7,618 1,498 6,048 1,846 3,949 4,494 6,382 33,582 Rkatsiteli 1,289 5,250 936 3,903 1,643 2,747 3,486 3,787 23,041 Saperavi 308 1,787 491 1,682 199 952 565 2,316 8,300 Hybrids 150 581 71 463 4 250 443 279 2,241 Grape Harvest, tonnes 11,440 46,095 8,525 29,987 10,924 24,226 29,632 40,474 201,303 Rkatsiteli 8,451 33,510 5,864 19,135 10,121 17,888 23,839 25,666 144,474 Saperavi 2,143 7,625 2,249 7,512 787 4,979 2,130 13,178 40,603 Hybrids 846 4,960 412 3,340 16 1,359 3,663 1,630 16,226 Average Yield, tonne/ha 6.5 6.1 5.7 5.0 5.9 6.1 6.6 6.3 6.0 Rkatsiteli 6.6 6.4 6.3 4.9 6.2 6.5 6.8 6.8 6.3 Saperavi 7.0 4.3 4.6 4.5 4.0 5.2 3.8 5.7 4.9 Hybrids 5.6 8.5 5.8 7.2 4.0 5.4 8.3 5.8 7.2 Grape Price, GEL/kg Rkatsiteli 0.35 0.35 0.35 0.30 0.35 0.35 0.27 0.35 0.35 Saperavi 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.45 Hybrids 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20 Source: Ministry of Agriculture ANNex 2. Statistical information on the wine sector in Kakheti, 2007 39KAKheti ReGioNAl DeveloPmeNt StRAteGy KAKHETI WINE PLANTS, BY MUNICIPALITY akhmeta municipality There are few wine cellars in the Akhmeta Munici pality, where the wine produced is mainly sold in neighbouring districts. The wine companies are: 1. Badagoni Ltd., which has average capacity and owns vineyards. 2. Wine Cellar of the Alaverdi Monastery, which was rehabilitated by Badagoni Ltd. 3. Palavani Ltd.(Kistauri Factory), which is lo cated in the centre of the quality white grape zone; it is a relatively old, but operational. 4. Akhmeta Wine House, Joint Stock Company (JSC) (Akhmeta Factory), which is large scale, but outdated. gurjaani municipality Gurjaani Municipality is famous for its large-scale wine factories, which mainly have outdated equip ment. There is slow progress in terms of updating equipment, although new investments are planned: The wine companies are: 1. Gurjaani Wine Factory. 2. Mukuzani Wine Factory Ltd. 3. Zegaani Wine Factory Ltd. 4. Vachnadziani Wine Cellar Ltd. 5. Velistsikhe Ltd. 6. Kotekhi-Gurjaani Wine Factory Ltd. 7. Chandari Ltd., which owns large wine facto ries and has old but operational production line, often rented out, and produces small quantities of wine. 8. Alaverdi Ltd., a new company, with modern equipment. 9. Aguna Ltd., a new company, small cellar with modern equipment. 10. Kardenakhi Wine Factory (Kardenakhi Lower Factory). 11. Alazani Ltd. (Kardenakhi Factory). 12. Kardenakhi Wine Cellar (Upper Cellar), with old equipment; mainly rented out sea sonally. 13. Nagdi Marani Ltd. (Tsarapi Marani), newly established small cellar. 14. Kachreti Ltd. (Kachreti wine factory), located in outer Kakheti. Large size and capacity fac tory; non-operational. dedoplistskaro municipality 1. Mshvidoba + Ltd., outdated, although op erational equipment, mainly produces white non-bottled wine. 2. Tushishvili Wine Sorts, outdated, but well functioning factory. 3. Gonashvili Cellar, small Kakhetian wine cel lar, highly attractive for tourists. telavi municipality Most of the famous wine producers, from farmer cellars to large producers, are located in Telavi Municipality: 1. Georgian Wine and Spirits Company (GWS) Ltd., one of the first quality Georgian wine producers. Represents the branch of “Pernod Ricard Europe” Group in Georgia. 2. Telavi Wine Cellar Ltd., one of the first qual ity Georgian wine producers in Georgia. 3. Teliani Valley, JSC, one of the best known brand names in and outside Georgia. 4. SHUMI Wine Company Ltd. 5. Old Wine Cellar of Tsinandali Ltd. 6. Kakhuri Ltd. 7. Corporation Georgian Wine (CGW) Ltd. 8. BESINI Ltd., a promising project; it has its own vineyards and the wine cellar is under construction. 9. Vinoterra Ltd, a small-scale, high quality, typ ical Kakhetian wine cellar. 10. Tsinandali Wine Factory Ltd. 11. Teliani Wine Factory 1950, Ltd., with wine cellars of rich tradition and history. The best quality wines have traditionally been pro duced here. Currently, it does not produce its own wine. 12. Telavi Wine Ltd., a wine cellar of the former research institute. Currently, it does not pro duce its own wine. ANNex 2. Statistical information on the wine sector in Kakheti, 2007 40 KAKheti ReGioNAl DeveloPmeNt StRAteGy 13. Akura Wine Factory, a medium-size and qual ity wine cellar. 14. Napareuli 1890 Ltd. 15. Kakheti Wine House Ltd. (Saniore Factory), a well-equipped wine cellar from Napareuli mi crozone, working at low capacity. 16. Napareuli Old Wine Cellar Ltd., a small wine cellar producing good quality wine. lagodekhi municipality 1. Baisubani Wine Factory, large-scale, old fac tory. sagarejo municipality 1. Khashmi Factory, with modern and Soviet equipment, mainly serving other companies. 2. Manavi Wine Cellar Ltd., a newly established, well-equipped and functional wine cellar. 3. Manavi, JSC, under construction on the old factory site. 4. Saamo Ltd. 5. Badiauri, JSC, large-scale wine factories, with slightly outdated but operational equipment. Produce wines in small quantities; they often rent out their production lines. 6. Keburia Factory, newly established medium size wine cellar. 7. Kakhuri Traditional Winery Ltd., medium capacity factory. signagi municipality 1. Anaga Ltd.(Anaga Factory). 2. Tibaani + Ltd., Tibaani Wine Factory, out dated factories, not operational. 3. Khirsi Factory, JSC, outdated but operational. 4. Taro Invest, with modern equipment; owns diverse varietal vineyards. Kvareli municipality 1. Corporation Kindzmarauli, JSC, a wine cellar with modern equipment; its management has progressive views 2. Kindzmarauli Marani Ltd., a newly estab lished, modern wine cellar in the middle of Kindzmarauli vineyards. 3. Sakartvelos Marani Ltd., which built a new factory on the site of an older one; owns a tun nel in the rock, with an antique wine cellar; currently not producing wine. 4. Gallery of Georgian Wines, a large factory, used by several companies. 5. Peter Mertes Sakartvelo Ltd., a medium-ca pacity modern factory. 6. Shildi Wine Factory, a medium-size factory with old equipment. 7. Shildi Wine Factory II, a medium-size factory with old equipment. 8. Chikaani Wine Factory Ltd., currently refur bishing the equipment of the old factory. 9. I. P. Tengiz Lomidze (Akhalsopeli Wine Facto ry), mid-size, old style Kakheti-type wine cellar. ANNex 2. Statistical information on the wine sector in Kakheti, 2007 41KAKheti ReGioNAl DeveloPmeNt StRAteGy TABLE 2. GEORGIAN WINE ExPORTS COUNTRY WINE WINE MATERIALS BRENDY CHACHA (GRAPPA) 2005 2006 2007 2005 2006 2007 2005 2006 2007 2005 2006 2007 CIS Countries 1 Russia 3,925,212 814,281 0 0 193,422 59,975 0 40,321 3,943 0 2 Ukraine 218,582 304,240 412,276 5,500 24,904 41,792 1,475,354 950 396 19,975 3 Belarus 6,460 45,375 41,080 5,576 13,360 4,852 101,452 0 0 27,792 4 Latvia 17,088 43,216 40,721 2,298 4,352 1,632 47,074 13 314 4,724 5 Lithuania 12,157 8,534 10,277 0 0 25 0 0 0 0 6 Estonia 6,505 10,901 10,109 0 0 0 0 0 0 0 7 Kazakhstan 29,169 115,955 113,501 0 3,232 39,256 112,236 0 480 22,392 8 Kirgistan 494 0 0 0 0 0 0 0 0 0 9 Tajykystan 245 754 1,216 0 0 14 1,380 0 0 0 10 Turkmenistan 2,250 752 0 0 0 0 0 0 0 0 11 Uzbekystan 0 0 3,326 0 0 0 0 0 0 12 Azerbayjan 3,065 9,821 3,402 55,604 0 12,094 502,200 0 9 0 13 Armenia 2,757 0 455 1,238 0 0 0 0 9 0 14 Moldova 0 545 0 0 0 0 0 0 0 0 Total/Dalis/* 4,223,984 1,354,374 636,363 70,216 239,270 159,640 41,284 5,151 Total/Bottles 5,6319,787 18,058,307 8,484,835 3,192,798 2,239,696 74,883 EU Countries 15 France 3,626 15 1,654 0 0 2 0 0 0 656 16 Germany 10,352 4,420 9,136 0 0 30 138 12 226 240 17 Italy 0 45 216 0 0 0 0 0 0 0 18 United Kingdom 7,014 5877 3,295 0 0 0 0 0 5 0 19 Denmark 68 54 0 0 0 0 0 0 0 0 20 Netherlands 3,173 992 2,655 0 0 0 0 0 2 0 21 Belgium 678 2,759 632 0 0 0 0 0 0 108 WINE ExPORTS IN 2005–2007 AND THE DYNAMICS OF ExPORT MARKET DEVELOPMENT ANNex 2. Statistical information on the wine sector in Kakheti, 2007 42 KAKheti ReGioNAl DeveloPmeNt StRAteGy TABLE 2. GEORGIAN WINE ExPORTS COUNTRY WINE WINE MATERIALS BRENDY CHACHA (GRAPPA) 2005 2006 2007 2005 2006 2007 2005 2006 2007 2005 2006 2007 22 Sweden 972 0 393 0 0 0 0 0 0 0 23 Switzerland 0 1,030 764 0 0 0 0 0 0 0 24 Ireland 0 1,054 2,907 0 0 0 0 0 0 0 25 Spain 0 0 1,272 0 0 0 0 0 0 0 26 Austria 0 198 0 0 0 0 0 0 0 0 27 Scotland 0 0 224 0 0 0 0 0 0 0 28 Finland 0 990 833 0 0 0 700 0 0 960 29 Bulgaria 77 140 378 64,000 0 0 0 0 0 0 30 Poland 11,692 19,170 26,629 0 0 0 21,992 354 0 0 31 Hungary 452 0 0 0 0 0 0 0 0 0 32 Czech Republic 2,500 2,021 5,501 4,600 325 658 35,676 0 38 0 33 Romania 532 0 0 0 0 0 0 0 0 0 34 Slovak Republic 227 0 1 0 0 0 0 0 0 0 35 Slovenia 0 0 29 0 0 0 384 0 0 0 36 Greece 921 86 548 0 0 0 0 0 0 0 37 Portugal 2 0 0 0 0 0 0 0 0 0 38 Cyprus 2,018 1,974 0 0 0 0 0 0 0 0 39 Turkey 2,887 165 792 0 0 0 0 0 0 0 Total/Dalis 47,191 40,990 57,859 0 0 68,600 325 690 366 271 Total/Bottles 629,213 546,537 771,452 0 0 0 0 0 58,890 0 0 1,964 Central Asian Countries 40 Israel 8,559 7,536 9,026 0 0 0 11,684 30 126 13,335 41 UAE 0 690 1,545 0 0 0 0 0 0 Total/Dalis 8559 8,226 10,571 0 0 0 0 0 30 126 Total/Bottles 114,120 109,677 140,949 11,684 13,335 East Asian Countries 42 China 2,813 5,472 8,794 0 919 0 0 7,343 0 0 43 Japan 3,905 4,970 2,581 0 0 5 0 2 0 ANNex 2. Statistical information on the wine sector in Kakheti, 2007 43KAKheti ReGioNAl DeveloPmeNt StRAteGy TABLE 2. GEORGIAN WINE ExPORTS COUNTRY WINE WINE MATERIALS BRENDY CHACHA (GRAPPA) 2005 2006 2007 2005 2006 2007 2005 2006 2007 2005 2006 2007 44 South Korea 0 53 1,088 0 0 0 0 0 0 45 Korea 202 0 709 0 0 0 0 0 0 46 Mongolia 0 0 1,132 0 0 0 2,550 0 0 47 Taiwan 788 9 16 0 0 0 0 0 0 Total/Dalis 7,708 10,504 14,320 0 0 0 919 5 7,343 2 0 Total/Bottles 102,773 14,0053 190,925 2,550 North Americas 48 USA 160,360 43,276 33,217 0 1,522 1,058 3,622 3 61 780 49 Canada 1,462 3,601 5,583 0 0 168 10,812 30 78 0 Total/Dalis 161,822 46,877 38,800 0 0 0 1,522 1,226 33 139 Total/Bottles 2,157,627 625,022 517,327 780 South America 50 Panama 0 1,022 0 0 0 0 0 252 0 Total/Dalis 0 1,022 0 0 0 0 0 252 0 Total/Bottles Duty-free/ Airport Total/Dalis 0 0 3,717 0 0 0 0 0 0 0 Total/Bottles 0 0 49,554 0 0 0 0 0 2,047 0 0 1,868 Total exports Total/Dalis 4,449,264 1,461,993 761,630 138,816 242,036 161,561 0 49,056 5,941 Total/Bottles 59,323,520 19,493,219 10,155,042 3,227,147 2,873,746 2,329,301 80,931 92,830 * Dali-10 litres ANNex 2. Statistical information on the wine sector in Kakheti, 2007 44 KAKheti ReGioNAl DeveloPmeNt StRAteGy ANNEx 3 Linkage of Kakheti Regional Development Strategy with the Basic Data and Directions Document and Central Budget Expenditure Priorities For the KRDS to be successful, good knowledge of the central government priorities is required, as set in the Basic Data and Directions Document (BDD). It is equally important to consult the Medium-Term Expenditure Framework (MTEF) concerning which activities within the Kakheti Region are financed through Central Budget funding. It is recommended to include in the KRDS aspects of BDD 2009–2012 that concern Akhmeta, Gurjaani, Dedoplistskaro, Telavi, Lagodekhi, Sagarejo and Kvareli Municipali ties, as shown below: extract from Basic data and directions document (2009–2012) 2009-2012 PRIORITY DIRECTIONS FOR AKHMETA, GURJAANI, DEDOPLISTSKARO, TELAVI, LAGODEKHI, SAGAREJO, SIGNAGI AND KVARELI MUNICIPALITIES priorities 1. Infrastructure development 2. tourism development 3. Industry and agri culture development Justifica tion of the priorities in respect of the current situ ation There is need for cons truction and development: water supply systems, ou tdoor lighting, local roads, flood canals, medium and high pressure networks for natural gas. The natural beauty of the region and ancient historic monuments create favoura ble conditions for tourism industry development. Tourism would also benefit from state forest and reserve funds, whose flora and fau na are unique in the world. Processing facilities are needed for agriculture products, especially tho se for fruits and grapes. Tractors and agricultu ral service centres are needed expected time frame 2009–2012 2009–2012 2009–2012 Expected results Water supply will be im proved. The socio-economic situ ation in the region will be improved. Forest reserves will be safe guarded. Risks of floods and landslides of settlements and agriculture land will be mitigated. Electricity will be provided to the population. Maintenance of the his toric heritage will be im proved. The population’s eco nomic conditions will be improved. Living conditions will be improved. A healthy lifestyle will be promoted. People will be employed in the agriculture pro cessing industry. Agricultural producers will have a guaranteed market. ANNex 3. linkage of Kakheti Regional Development Strategy with the Basic Data and Directions Document and central Budget expenditure Priorities