WFP Georgia BASELINE VULNERABILITY ANALYSIS REPORT

WFP Georgia

BASELINE VULNERABILITY ANALYSIS REPORT

Final Draft

March 2001

By Tomaso Ceccarelli, VAM Consultant

i

OUTLINE: Acknowledgements FOREWORD and SUMMARY 1 COUNTRY ECONOMIC AND SOCIAL CONTEXT

1.1 GDP Levels and Trends……………………………………………………...page 1 1.2 Trends in Inflation and Prices………………………………………………page 3 1.3 Human Development Index (and its components)……………………. page 4 1.4 Demographic Indicators/Migration Patterns……………………………. page 4 1.5 Education Indicators. State of Education System………………………page 5 1.6 Health and Nutrition Indicators. State of Health System………………page 6 1.7 Access to Water and Sanitation……………………………………………page 8 1.8 Employment……………………………………………………………………page 8 1.9 The Social Welfare System……………………………………………..….page 10 1.10 Poverty Indicators: Official/New Poverty Line………………………….page 11 1.11 The Role of Women………………………………………………………….page 12 1.12 IDPs and Refugees: Context and Policies……………………………....page 13 1.13 Vulnerability Related to Natural Hazards (including drought)………page 14 1.14 Agricultural and Food Sector Indicators ………………………………..page 16

2 FOOD SECURITY ANALYSIS

2.1 NATIONAL/REGIONAL FOOD ECONOMIES………………………………….page 22

2.1.1. Food Availability: Levels and Trends……………………………………………………..page 22 2.1.2. Food Access…………………………………………………………………………………...page 26 2.1.3. Food Utilization………………………………………………………………………………..page 30

2.2 HOUSEHOLD FOOD ECONOMIES……………………………………………..page 31

2.2.1. Household Profiling at National Level…………………………………………………….page 31 2.2.2. A Comparison Between "Conventional" and "New" Vulnerable Groups…………..page 31 2.2.3. Identification of Local Household Food Economies…………………………………...page 34 2.2.4. Characteristics of Food Economy Zones and Household Groups…………………..page 35

3 IMPLICATIONS FOR FOOD AID PROGRAMMING……………………………..page 50

3.1 Geographic Targeting……………………………………………………………page 50 3.2 Beneficiary Targeting and Role of Food Aid………………………………..page 50 3.3 Activity Selection…………………………………………………………………page 52 3.4 Food Security Monitoring……………………………………………………….page 53

References Abbreviations Appendices

I. Current classifications of vulnerable groups II. Main Types of Coping Strategies III. Household Profiles at National Level: A Summary Description IV. Procedures Used for the Identification of Rural Systems V. FEZ Summary Tables VI. Matrix for an Overall Vulnerability Assessment of FEZ

ii

Acknowledgements I wish to thank all those who have contributed in different ways to this report. A special thank goes to the Country Director, Joseph-Alain Charrière who promoted and supported the VAM exercise all the way through, and to the VAM people in Rome, especially to Pablo Recalde, Jeff Marzilli, Annalisa Conte, for their continuous guidance. Many thanks also to Joyce Luma in Islamabad. In Tbilisi I wish to thank all the WFP national and international staff, namely Marina Kutateladze, Khatuna Epremidze, Mary Njoroge, Pascale Crapouse, Yulon Tsilosani, and of course, Tamara Nanitashvili, the VAM national officer (sorry for the many hours of overtime and for the stress!). I have very much appreciated the support of everybody in the office, not only professionally but also in the social sphere (how can I for instance forget the Khashi at 7.00 in the morning ?). My appreciation goes also of course to all, in governmental and non governmental organizations, and to the people in the villages with whom I have been in touch once in Georgia. I especially wish to mention Gaioz Kubaneishvili. I also wish to thank Francoise Trine and Annika Stanley for the useful discussions.

iii

FOREWORD and SUMMARY The goal of this report is to inform the Country Office and all interested parties, on the structural dimensions of food insecurity and vulnerability in Georgia. In its intentions the report should provide a baseline study for future reference in the implementation of WFP programming activities. WFP has been operating in Georgia since 1993. In July 2000 a two years Protracted Relief and Recovery Operation (PRRO), was launched envisaging the assistance of 454,000 beneficiaries.1 The programme was suspended also due to the severe drought which, starting from summer 2000, affected five regions of East Georgia, and one region; Imereti, in West Georgia. An emergency operation was subsequently planned2 initially envisaging the assistance of 696,000 victims of drought for a period of eight months in the affected regions. Based on the findings of a Household Food Economy Assessment (HFEA) carried out in October-November 2000, the recommended number of beneficiaries to be assisted is some 540,300. This study draws principally on VAM activities, which were initiated in Georgia in September 1999 with the scope of orienting the targeting in the context of the PRRO; however an effort has been made in order to integrate as much as possible contributions from the same HFEA as well as from the most relevant key informants and studies on food security and vulnerability in Georgia. In the context of this report food security is seen as a condition that allows people to have physical, social, and economic access to sufficient, safe and nutritious food which meets their dietary needs and food preferences for an active and healthy life. The three key dimensions of food security are:

� Sufficient availability � Adequate access � Appropriate utilization

Vulnerability is the presence of factors placing people at risk of becoming food insecure or malnourished, including their ability to cope. Vulnerability is therefore the result of exposure to risk factors and of underlying socio-economic processes, which reduces the capacity of a population or an individual household to cope with those risks. With the break-up of the Soviet Union in 1990 Georgia experienced a drastic fall in production in all economic sectors, high rates of inflation, unemployment and subsequent decrease in real incomes. The economy began to recover in 1995, also as a result of the economic reforms launched at various levels. However the poor performance in 1999 and even worse for the year 2000 (also due to the severe drought), suggest that many structural problems remain unsolved. 1 Georgia 6122-01, Relief and Recovery Assistance for Vulnerable Groups; a total of 29.934 tons of food requirements are envisaged. 2 Georgia EMOP GRG 6302.00, Food Assistance to Drought affected People in Georgia; a total of 65,772 tons of wheat flour, pulses and vegetable oil.

iv

Although Georgia ranks well in terms of the Human Development Index (HDI), this is largely due to living standards inherited from the Soviet times and it hides the reality that social services (health, education and pension systems above all) have been heavily deteriorating over the last decade. This may possibly lead to more long-term, structural negative effects on the general living conditions of Georgians. In the composition of the HDI, the income factor drags Georgia at much lower positions. Income is indeed is a key factor for interpreting vulnerability in the country. The collapse of the Soviet Union brought about an abrupt reduction in the number of employed; also the employment structure has drastically changed with the so-called "self-employed" (mainly in agriculture) accounting for over 55% of the total employed. The fact that agriculture has in fact acted as a buffer for unemployment, is not necessarily encouraging, since the reported income is close to the minimum subsistence levels. The expenditures of the average Georgian households are presently equal or even above the minimum subsistence level. This hides the fact that a significant (presently around 53%) and increasing proportion of the population has incomes below the poverty line. Georgia is largely an agriculture-based economy, and has traditionally been a net exporter of food products and a major supplier of vegetables, fruits, tea, and wine to the rest of the FSU. However, due to the break-up of commercial ties with the Soviet Union, the sector has undergone a deep crisis. Cash crops which were traditionally meant for export markets have been reduced in importance; food crops and livestock breeding which are typical of a subsistence agriculture have increased. The crisis in this sector also affected the food processing industry, as well as the state of rural land development, infrastructures and the level of mechanization. Starting from 1992 a land privatization process has been undertaken aiming at the creation of two forms of land tenure: ownership by families as well as lease of state-owned land by commercial enterprises. The present situation reflects indeed the dualism originally envisaged. However the small-holder sector has clearly evolved towards subsistence agriculture, being constrained by limited access to a number of key production factors. Apart from the specific circumstances of the drought in 2000, Georgia clearly is, and has been traditionally, a deficit country in terms of grain production; in the past this deficit has been covered by (registered) commercial imports. Since 1994 non registered imports and food aid have covered the total utilization needs; this is also indicated by the relative stability of bread prices. But, if food is usually available in the country, to what extent can Georgian households afford purchasing it ? In terms of economic access to food it is observed that per-capita consumption expenditures have diminished of around 20% over the period 1996-2000, and food expenditures of 25%. Apart from average figures, data suggest that especially the poorest segments of the population are spending proportionally (and increasingly) more on food. This pattern is confirmed when considering the diet composition: the share of cheap/starchy food (bread, cereals and potatoes) has increased for the poorest households. The temporal (chronic vs. transient) and broad geographical (Region wise, Rural vs. Urban) dimensions of vulnerability and food-insecurity have also been discussed.

v

As to food utilization: problems related to a non equitable distribution of food within the household, are of minor importance in Georgia. However, the general deterioration of living standards and social services is posing problems to specific segments of the society, especially women and lonely elderly and could generate future negative impacts on child nutrition. Households have to be further differentiated based on their relative vulnerability and food-insecurity status. Household profiles were drawn for this purposes and the so called “conventional” vulnerable groups as defined by GOG, were compared with “new” ones based on different criteria such as residence in urban or rural areas, and access to land. The profiling at national level provides some initial indications, although there is clearly a need for further differentiation in the rural areas, identifying causal patterns of vulnerability and insecurity as well as main socio-economic characteristics and geographic concentration of vulnerable households. The HFEA conducted by WFP in the context of its emergency operations, represents a major source of information in this respect. The approach taken in the present report was that of comparing and integrating the HFEA findings with available secondary information produced by VAM or other studies, looking as much as possible for “converging patterns” among the different sources. This report attempts to analyse the structural dimensions of the vulnerability in Georgia, not only of food insecurity caused by the recent drought. A number of food economy zones (FEZ) were identified, and “profiles” were prepared for each zone. An evaluation of the overall vulnerability for each FEZ was also provided, based on secondary information as well as on the incidence of vulnerable according to the HFEA. The profile also included a description of the different household groups identified, summarizing their main characteristics, relative vulnerability and coping strategies. Finally, the implications in terms of food aid programming were discussed. This was done in terms of geographical targeting as well as beneficiary selection considering the specific role of food aid; finally implications in terms of activity selection were also discussed. The HFEA has provided, within each FEZ, a stratification of households in different groups. . The assumption made was that households identified as food-insecure in the occasion of the drought (Group 4 and 5), can be also regarded as vulnerable (i.e. at risk of becoming food insecure) in a “normal year”. Based on HFEA findings these amount to around 41% of the households in the rural Georgia. Possible modalities of assistance through food aid as well as criteria for activity selection and food security monitoring were also suggested. There is a possible role for food aid also in case of households in group 3, which often represent the “community safety net” for the vulnerable. Households in this group, although not strictly vulnerable from the point of caloric deficit and food basket, includes those with the highest potential for recovery in agricultural activities.

1

1. COUNTRY ECONOMIC AND SOCIAL CONTEXT 1.1 GDP Levels and Trends With the break-up of the Soviet Union in 1990 (and as an immediate consequence of the disruption of traditional trade and payments links), the gross domestic product in Georgia declined by 75 in the period 1990 to 1994. This being the consequence of a combination of factors: drastic fall in production in all economic sectors, high rates of inflation, unemployment and subsequent decrease in real incomes. The economy began to recover in 1995 (see Chart 1), also as a result of the economic reforms launched at various levels. This positive trend lasted untill 1998, coinciding with the financial crisis in Russia. The poor performance in 1999 and similar or even worse estimates for the year 2000 however, suggest that this crisis is only one of the reasons behind yet another negative trend.3

Chart 1: GDP growth 1995-1999

Source: World Bank. World Development Indicators Database

Neither industry nor agriculture has recovered over the last decade showing, on the contrary, stagnation if not a significant decline in capacity utilization and production. Even when looking at progress in the period 1995-1997, these were largely due to improvements in trade, services and construction sectors, a reflection of the growing importance of informal economy. As shown in Chart 2 trade has contributed to much of the progress; its share in GDP grew from 8 per cent in 1994 to 22 per cent in 1998, almost equalling agriculture.4

3 Georgia can be classified as a food-deficit, low-income country; in this respect it is eligible for soft loans from the World Bank’s soft loan window, the International Development Association. 4 Agriculture provided most of the GDP "share" in the worst years (up to 66% in 1993 !).

2

Chart 2: GDP by Sector 1990-1998

Source: SDS, quoted in Sitan (Break in series after 1994)

According to SDS estimates, the GDP per capita in 1998 was 672 USD, further reduced to 480 USD in 1999.5 The World Bank calculates the per capita figures over the Gross National Product, the estimate for 1998 being 740 USD, and 620 USD for 1999.6 Figures on a per capita basis however, are questionable due to problems in accurately estimating the total population in Georgia (see section 1.1.3). For instance, if we had to take the population estimate by SDS (from the Household Survey of Georgia), this will add-up to 4.9 millions only, giving a per capita GNP in 1998 of 694 GEL. It is therefore more meaningful to refer to trends, as shown in Chart 3. As a reflection of GDP trends (and of an overall stagnation in population growth), GNP/capita shows an increase over 1995-1997, as well as a decline starting again from 1998:

Chart 3: GNP/capita 1995-1999

Source: World Bank. World Development Indicators Database

5 National Accounts and Macroeconomic Analysis Division, SDS. 6 For a population of 5.4 million, at the average exchange rate in 1998 of 1.33.

500

550

600

650

700

750

800

1995 1996 1997 1998 1999

GNP/Capita ($)

0

10

20

30

40

50

60

70

1990 1991 1992 1993 1994 1995 1996 1997 1998

% s

hare

of G

DP

at c

urre

nt p

rices Industry

Agriculture andforestry

Trade

3

1.2 Trends in Inflation and Prices One of the most serious consequences of the break-up of economic ties with the Soviet Union, was hyperinflation.7 It is only after the government has embarked on a its program of economic reforms that inflation became under control. Inflation rate declined from 57% in 1995, to 14% in 1996, to 7.3% in 1997. The new Georgian currency, the Lari (GEL), introduced in October 1995, performed satisfactorily. After raising by 23% in 1995, as a reaction to the introduction of the Lari and to the liberalisation of bread prices,8 consumer prices rose only moderately over the subsequent years.9 Chart 4 portrays the situation staring from 1996, both in terms of the Consumer Price Index and of prices of the main staple food (bread, potato, maize). It is interesting to observe that the while the CPI and the FPI (reflecting the share of food, beverages, tobacco) have been growing over the last four years with an average rate of 9%, the same does not apply for the price of staple food, which remained practically unchanged. This suggests that main contributors to the increase of prices are non essential food as well as non-food items.

Chart 4: Trends in CPI and Prices of Main Staple Food

Source: SDS Food Security Situation Bulletin, Number 1 2000

7 By end-1993, annual inflation had reached 8,400 percent. 8 Price liberalization and abolishment of the bread rationing system took place in June 1996 (see Melikidze, p.26). 9 As pointed by Melikidze, p.27, the biggest part of flour is smuggled into the country and remains beyond formal taxation.

100

105

110

115

120

125

130

135

140

1996 1997 1998 1999 2000 *

1996

= 1

00 CPI (1996=100)

FPI (food, beverages,tobacco)

0

10

20

30

40

50

60

70

80

1996 1997 1998 1999 2000 *

GEL

/kg

x100 Bread

MaizePotato

4

1.3 Human Development Index (and its components) In the year 2000 Georgia ranked 70 out of the total 147 countries, in terms of the Human Development Index (HDI), with a remarkable improvement from the 1998 position (108th). However, Georgia's relatively high position is mainly due to two of the factors contributing to the HDI: high school enrolment ratios and life expectancy at birth. These two factors, largely inherited from the standards of the Soviet times, are unlikely to change significantly in the short term. However, as it will be discussed further, this may hide the fact that health and education systems have been deteriorating over the last years, possibly leading to more long-term, structural negative effects. Income enters into the HDI as a proxy for a decent standard of living; it accounts for those dimensions of human development which are neither reflected in a long and healthy life, nor in the level of knowledge. The income factor (expressed by real GDP per capita), plays an important role, dragging Georgia at the lower positions in the HDI scale;10 it therefore deserves a detailed discussion (see section 1.10).11 1.4 Demographic indicators and migration patterns

The last census in Georgia dates back to 1989: the total estimated population was 5.44 millions. In 1997, applying the estimated growth rates, it has declined to about 5.38. In the next Chart, yearly population changes (in terms of natural net increase and migration) are reported:

Chart 5: Population Dynamics, 1980-1997

Source: "Social-Economic Situation in Georgia, 97". Elaboration on SDS data

10 The improved ranking over the period 1998-2000 is largely explained by the use of a refined methodology to discount income and not by a real improvement of living conditions in the country (for a detailed discussion see: Georgia Human Development Report, 2000, p. 21-22. 11 The World Bank has classified Georgia as a low-income country, which is eligible for soft loans from the Bank's soft loan window, the International Development Association.

5

A few patterns are worth mentioning: � the decline in the natural population growth, due to a dramatic reduction in births (from

18.5% in 1985, to 9.7% in 1997). � in the period 1989-96, an out-migration with a rate of more than 10% per year, and a

peak in 1990-93.12 Net migration became almost nil since1997, also due to the economic crisis in Russia and other CIS countries.

The result is a virtually nil population growth in the last few years.13 The progressive ageing is also a phenomenon worth mentioning, with a population over 60 of 18% (it was 15% in 1990), at levels which are comparable with must western and eastern countries. Being affected by major biases, the reliability of population figures remains a very uncertain point. Among others this is due to the inclusion and correct calculation of IDPs in collective centres, assumptions made on residents in Abkhazia, South Ossetia, as well as on emigrants.14 Comparing different sources and underlying assumptions the population figures range between 4.1 to 5.4 millions (i.e. a difference of around 24%). For instance, if SDS figures from the household survey are used as a basis for estimating the total population, the figure would be around 4.115 millions (which excludes by definition IDPs in collective centres16 as well as residents in Abkhazia and Southern Ossetia). 1.5 Education Indicators and State of the Education System

As previously indicated, the relatively high HDI index for Georgia is given, among others, by high school enrolment ratios, largely inherited from the Soviet period. Indeed, the country's education index (0.9)17 is even above that of Luxemburg. Adult female literacy ratio is also high: around 50%.

Chart 6: Enrolment Rates, 1989 to 1998

Source: Sitan, p.85 12 In Gachechiladze (1997, p.27) this is explained by the out-migration of ethnic non georgian population, due to political instability and risk of ethnic conflicts. 13 According to the latest World Health Report (WHO, 2000) there has been a population decrease of 1.0% over the period 1990-1999. 14 Many emigrants do not officially de-register from Georgia (see Gachechiladze, p. 29). 15 In 1997: 1.143.600 households by an average household size of 3.6 persons (SDS pers. comm. to the author). 16 For whom the best available estimate is 0.3 million (Source: figures quoted in Sitan, p.43). 17 An index compounding adult literacy (66%) and enrolments ratios (primary, secondary and tertiary).

0102030405060708090

100

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Enro

lmen

t as

% o

f rel

evan

tag

e gr

oup

Kindergarten Primary lower secondary upper secondary

6

High enrolment figures as shown in Chart 6 (especially in primary and lower secondary grades) however, do not portray a fair picture of the overall sustainability of the education system.18 The quality of the education provided is an important issue: out-of-date curricula and teaching methods, absence of investments in infrastructure, low (below poverty line) and delayed salaries (and, as a consequence, scarce motivation of teachers), specific problems related to tertiary education,19 are all concurring factors. One of the main underlying reasons is that public expenditures (in 1999 just above 2% of GDP, one twelfth of what it was in 1990) are even behind the average of low income countries; they have been decreasing since 1997. The poor state of the schooling system has not yet negatively impacted enrolment and graduation ratios, mostly due to the importance the Georgian traditionally place to education. However, the overall sustainability of the system is in question (see for instance, NHDR Georgia 2000, p. 64). National policies have been initiated recently, in order to revert this trend, first of all providing more investments in support of physical, financial and human resources involved in the schooling system. 1.6 Health Indicators and State of the Health System A relatively high life expectancy (72.9 years) is also contributing to the good HDI rank. Difference according to gender are significant: 69.4 for males vs. 76.7 for females (WHO, 2000). This indicator however, does not reflect the opinion of most Georgians on the state of the health sector; "scratching the surface" the very poor conditions of the system appear in all its implications. If the WHO unified index is considered and analysed in its single components, some more elements are appearing: on the one hand when the DALE index is taken20, the ranking of Georgia is still good.21 On the other hand when additional factors are considered, the picture changes substantially: as to performance indicators of the health system and expenditures per capita, Georgia scores among the worst countries. The main underlying factor is the level of public spending, the health sector being probably the worse affected from state budget reductions. The percentage on GDP fell from 4 % in 1991 to 0,6 % in 1999,22 yielding USD 4-5 per capita. According to the World Bank and the WHO this is insufficient to implement even the most essential primary care services. Clear consequences of the above are the very limited resources spent for investments and supplies, as well as for funding specific health programmes (rural areas being among the most affected). Also the under-funding of obligatory medical insurance had a major impact, in that Georgians are paying directly most of health expenses. This provides an explanation to the low and very unequal access to health care spending: while 30% of the population has almost no access and 50% has only limited access23 (i.e. can afford only 8% of the needed expenses), 2.5% of Georgians alone are accounting for 40% of the total spending.24

18 On the contrary pre-school (3-6 years) enrolment rates - especially in rural areas - are low (around 31%), when compared with other CIS countries. Also enrolment in upper secondary grades has been declining substantially over the last 10 years (Figures reported in Sitan p.82, 84). 19 e.g. high direct (and "informal") forms of payment on the side of the families, as well as discretional conditions for accessing universities. 20 The DALE adjusted indicator of life expectancy is not based solely on mortality data but expresses the years lived in a good health (WHO, 2000). 21 Dale indicator for Georgia is 66.3 years. 22 Much lower than for other CIS countries or even for the whole group of low-income countries where the average is around 1% ! 23 Out-of-pocket and often trough "informal" ways of payment. 24 NHDR Georgia, 2000, p.50

7

In 1997 private expenditures were estimated as 83 % of the total (Sitan p.48). One of the consequences of this deteriorating situation is the overall high level of morbidity, as reported by the SDS Survey on the Demand for Health Care Services.25 Apart from physical debilitation, debilitation chronic depression and mental illness are also increasing. In the HFEA it has been reported that a large number of households had at least one family member suffering from psychiatric disorders; these are usually males, reportedly more affected by the deteriorating social and economic conditions and displaced from their traditional roles. 26 When focussing on child health and nutrition, the situation appears to be relatively better-off. Table 1 for instance, shows that infant and child mortality have not risen since the beginning of transition:

Table 1: Infant and Child Mortality 1990-98 (Per 1,000 live births)

1990 1991 1992 1993 1994 1995 1996 1997 1998

Infant mortality rate 16.4 15.6 14.8 17.9 15.9 13.7 17.2 (27.8)

16.5 (23.5)

… (22.0)

Child mortality rate (less than 5 years)

19.9 17.9 17.0 ... 21.8 17.0 (28.1)

20.4 (31.9)

19.0 (26.0)

17.1 (25.3)

Note: Figures for 1992 to 1998 exclude Abkhazia and Tskhinvali.

Source: data quoted in Sitan from Ministry of Health (in parentheses), the remainder from SDS Statistics on child morbidity also show a remarkable decline although, it has been argued, this is mainly associated with a decreasing access to medical facilities. Systematic information on child nutrition is limited to 1999.27 According to the available data acute under-nutrition (in terms of weight for height) appears to be of marginal importance.28 These indications are also confirmed by the preliminary results of the nutrition survey carried out for WFP in the 200 drought affected regions.29 Stunting (height for age) however, affects 12 per cent of the children. The number of maternal deaths has not changed significantly since 1990; however, due to the decline in the number of births the rate has increased from around 40 to a very high 70 (per 100,000 live births). Beginning in 1995, a thorough reform of the health system was attempted. This has at least contributed to slowing down the process of deterioration in both infrastructure and health status of the population. A positive impact is that a large share of available budgetary funds is now dedicated to maternal and child health care. For instance, services such as child immunisation were restored.30 However, the very limited public spending on the health sector is a major constraint to the provision of even primary health care to the vast majority of the population. 25 According to the survey (covering summer 1997) one third of the interviewed people reported health disorders. Around 80% of the households had at least one ill member over the period considered; 14% of the households reported having a member with serious (chronic) physical limitations (World Bank Study on Poverty, Technical Paper p.17). 26 See HFEA p.7 27 More general issues related to nutrition will be covered in Chapter 2. 28 Sitan, p.15. 29 Save the Children Georgia, pers. comm. 30 Also thanks to the support of international organizations.

8

1.7 Access to Water and Sanitation A survey conducted in 1999 shows that almost 86 per cent of the urban and 43 per cent of the rural population has access to the piped water.31 The remainder of the rural population uses both protected and unprotected wells. Overall, 75.6% of the population uses safe drinking water. Access was higher in the urban areas (89.4%) compared to rural areas (61.2%).The sewerage system only caters for 77 per cent of the urban, but only 4 per cent of the rural population (where traditional or improved pit latrines are mostly found). It has also significantly deteriorated over the last 10 years and presently represents a major risk to health, due to leaks into the water pipes. 1.8 Employment Before the collapse of USSR virtually all those in working age were formally employed (around 81%).32 Unemployment was very low. Chart 7 shows the abrupt reduction in the number of employed (about one million people) which took place from 1990 to 1994, when employed over working age population fell to 57%. Registered (as distinct from real) unemployed also rose slightly (9% in 2000), but not enough to match the reduction in employment. Apart from the inactive population (which is also increasing33), the difference is mainly due to unemployed 34 and underemployed which did not register.

Chart 7 : Employed and Registered Unemployed , 1990 to 1997

Source: data quoted in Sitan, from SDS

Based on the newly introduced Labour Force Survey by SDS, unemployed (including an estimate of those non-registered) have been estimated as 324,000 in 1999, or 15.8% of the economically active population.35

31 However, as in many other cases, the lack of maintenance is the cause of the continuous deterioration of the system: at present over 80 % of the water supply network needs major upgrading (source: Department of the Ministry of Health, quoted in Sitan, p.64). Additionally, the frequent energy cuts (particularly in the winter), cause discontinuity of most water supplies. 32 Inactive (population in schooling age and disabled) excluded. 33 Due to the ageing of the population and to the effect of long term unemployment on expectations to ever find a job (the so called “discouraged” unemployed). 34 Reportedly between 267,000 and 400,000 per year, over the period considered and according to different surveys; in Sitan, P.29. 35 Based on the ILO “loose methodology”. See Tacis 2000 p.51. Due to the problems in the definition of formal employment and self-employment (as discussed earlier), these figures should still be taken cautiously and be indicative of general trends rather than of the total level of unemployment.

0500

1,0001,5002,0002,5003,0003,5004,000

1990

1991

1992

1993

1994

1995

1996

1997

Years

Popu

latio

n '0

00 Population of workingage*, ‘000Employed, ‘000

Registeredunemployed, 000

9

The trend shown over the period 1998-99 (an increase in the unemployment rate of 2.5%), indicates a deterioration of the labour market situation. 36 The employment structure as such, has drastically changed over the last decade: among the employed people those with formal employment are presently less than the so-called "self-employed" (see Chart 8), which accounted for over 55 % in 1999. This is mostly due to the definition by the government which, as from 1995, included those engaged in agriculture with more than one hectare.37 At present around 88% of the self-employed are engaged in agriculture.

Chart 8: Employment structure and its trend

Source: NHDR, 2000 Agriculture is the only category to have grown in terms of employment since1991, while employed in industry and construction have dropped dramatically. In the non-industrial branches the level of employment in the government bodies remained equal, with severe reductions in sectors such as health care and science. The fact that agriculture has acted (especially since 1995) as a buffer for unemployment, is not necessarily encouraging: inclusion as "self-employed" regardless of the actual net income earned through farming38 produces a distorted picture; it is interesting to note, for instance, that between 1996 and 1997 employment in agriculture grew by 16 per cent while GDP only increased by 2 per cent. It should be also observed that those who are regarded as self-employed in sectors other sectors, are in most cased engaged in very small scale businesses, much linked to the growing informal economy. Also, the very definition of "formally employed" should be looked at in more detail. For many employees39 this is nowadays almost a "nominal" position (very little or no income received, limited time involved); especially in the "budget sphere" it has to do with the maintenance of social networks.

36 The Labour Force Survey has introduced ILO definitions for unemployment. In Georgia however, given the importance of non or in-kind remuneration, this definition possibly fails to distinguish such "nominal" forms of employment. 37 This also explains the relative increase in the employment rate, starting from 1995 (See Chart 6). 38 In 1997 the average self-employment income in agriculture was 67 GEL per person per month (World Bank, Georgia: Poverty and income distribution, Technical paper 1, p.10:1999). 39 70% in the case of state employees, according to TACIS, p.53

10

In 1999 for instance, the average (for all sectors) monthly wage per worker was 79 GEL (43 after taxes). In the state sector 40 the average wage was 67 GEL, with the lowest salaries reported for the health and education sectors (45 GEL, 38 after taxes)41, all being below the “normative minimum salary” of 44 GEL.42 Moreover, if nominal wages are showing a modest growth, real wages, due to the increasing inflation continue to fall.43 The employment situation is particularly hard for women, accounting for nearly 70% of the non-active. When employed, women receive salaries which are 40% lower than male’s, also due to their larger presence in the health and education sectors44 and to the importance of the self-employed (which make 70% of the employed women). Moreover self-employed women are seldom “real entrepreneurs”, mostly being involved in agriculture and the informal sector. 1.9 The Social Security System Social security in Georgia includes a system of social allowances and unemployment benefits and the pension system. In terms of incidence over the GDP public spending for has more than doubled since 1998. However, due to state budget restrictions, institutional weaknesses and poor management the overall resources available are not enough for guaranteeing an effective safety net for the most vulnerable. The average pension is only around 14 GEL per month. In some cases (veterans) it can go up to a maximum 45 GEL/month. The pension system is payroll tax financed, with major budgetary transfers needed to compensate for tax under-collection. At present pensions absorb over 90 per cent of benefits in social security; there are presently more than 900,000 pensioners in Georgia, around 20 % of the population.45 The dependency ratio 46 shows that the system, is unsustainable. The remaining subsidies are even smaller: from the 18 GEL/month for families without a legal breadwinner, to the unemployment subsidy (12-15 GEL/Month for 6 months), to the subsidy for single mothers. Moreover, social benefits are disbursed just for a fraction of those entitled (for instance on average only 2% of the registered unemployed are receiving the subsidy) or paid in arrears (for pensions, five months, on average). Considering average pensions and arrears, in 2000 these were only 14% the minimum subsistence level. Structural reforms, mainly of the pension system, are now being designed. In the present circumstances of financial crisis, slow economic growth, reducing contribution base, their success is not granted. It is clear however, that the crisis of the pension system has deep implications in terms of poverty, as well as social and economic marginalization.

40 While in the private sector figures are likely to be underestimated due to underreporting, this is not the case for the budget sphere. 41 Figures from SDS quoted in Sitan. 42 The level of salary that, when taken together with other souces of income, is estimated to provide an average household with the minimum subsistence level (see Tacis 2000, P.57). 43 Inflation declined from 57 per cent in 1995, to 14 per cent in 1996, 7.3 per cent in 1997, rising slightly, to 10.9 per cent in 1999. Figures quoted in Sitan, p.23. and Tacis, p.12. 44 TACIS, p.56 45 17 or 22 % of the population, depending on the estimates (see 1.1.3 for a discussion). 46 Contributor to beneficiary ratio is 1:1.2. In a balanced system should be around 3:1. TACIS, p.60

11

1.10 Income and Poverty Indicators Income is a major (although not exclusive) determinant of poverty and food-insecurity in Georgia. As for other countries, reported consumption/expenditures (level, type) are used as a proxy for real income,47 especially due to the large underreporting in the case of income.48 Also, the gap between reported income and expenditures has been growing over the period 1995-1999,49 due to the increasing importance of the informal economy. In Georgia an "official poverty line" has been defined since 1997, based on a minimum subsistence basket. This "absolute" poverty line is expressed as the cost of the same food basket and valued at current prices by the SDS; the number of households falling under this line are calculated quarterly based on the findings from the Household Survey of Georgia. SDS calculates also two “relative” poverty lines, set respectively at 60 per cent and 40 per cent of the national median consumption expenditure The latter coincides with the "extreme poverty line" as defined by the World Bank (in Technical Paper 1, 1999, p.2) In its 1999 report on poverty the World Bank advocated for a "new poverty line", based on a revised subsistence basket. In the same year this line was roughly one half (52 GE, being the "equivalent" for an adult male worker 50) the official one (110 GEL). The justification for using a new poverty line is that the official basket is regarded as "unrealistic" (too generous) when compared with actual consumption patterns (World Bank Technical Paper 1, 1999, p.2). The Human Development Report, Georgia 1999 (p.16), however, questions this conclusion and adds evidence to the appropriateness of the official poverty line. On average expenditures are presently (year 1999-2000) equal or even above the minimum subsistence level. This hides the fact that a significant (and increasing) proportion of the population has incomes below the poverty line. The next table shows this trend comparing different poverty lines over the last three years:

47 The Center for Strategic Research and Development, has estimated the unreported income in 1998 to be around 81% of the total real income in the country. 48 Among the possible reasons for underreporting: the fact that a share of it is earned in the informal sector, or being illicit (when not illegal), or earned in kind, or not declared for taxation purposes, or generated as self-consumption in agricultural activities. 49 See Budgetary Office of Parliament, quoted in Human Development Report, Georgia 2000, p.24 50 In the household survey poverty lines are originally calculated for the household, and graded over its size. However, household expenditures are also be standardised in the form of "adult equivalents", accounting for differences in size and composition. In this case an adult man is given a weight of 1.00, while a woman of working age 0.84, and a child 0.64, etc. Differences depending on the size are based on the assumption that (as far as expenditures are concerned) "economies of scale" are achieved, in the case of second and subsequent members. Also, small children may cost less than adults, and similarly pensioners. The Gini coefficient derived from the curve was 0.36 in 1997, which places Georgia just below the levels found in most Latin American countries (see World Bank study on poverty, p.21).

12

Table 2: Different Estimates of Poverty, 1997 to 1999

Households below poverty line (in %) Poverty line 1997 1998 1999

Household Survey of Georgia (Official) Minimum subsistence, 110 GEL1 51 52 53 60 % of median national consumption 22 23 23 40% of median national consumption 9 10 10 World Bank 52 lari per adult male equivalent2 11.1

1 Equivalent for an adult male worker.2 Refers to the fourth quarter of 1997 only. Sources: SDS and World Bank, Georgia: Poverty and income distribution, quoted in Sitan.

The Lorenz Curve of distribution indicates the level of inequality in income distribution: in 1996 (see Chart 9) 50% of the households accounted for less than 10% of the total income. 51

Chart 9: Lorenz Curve of income distribution, year 1996

Source: NHDR, 1996 1.11 The Role of Women Issues related to gender equality (in respect to health, education, and employment) are discussed in the relevant sections. An UNDP study on the status of women,52 points to a number of additional issues. In the soviet period women enjoyed a (relatively speaking) high level of equality; this was due to conditions of full employment, an equally high level of education, the functioning of a social protection system. Not all aspects concerning the status of women were as positive as it seemed at a first glance: for instance the traditional position of women in the Georgian society remained unchanged, with the domestic workloads adding to the professional engagement.

51 Quite in contradiction with the other available data, equality shows an improvement in the years 1999-2000: see NHDR 2000, p.28 for a discussion. 52 UNDP, Status of women in Georgia, Tbilisi, 1999.

13

Certainly recent years brought about a number of changes in the traditional roles of females (e.g. equalisation in the opinions towards family management). Also, the crisis found women more able to adapt to the changed circumstances, engaging in a wide range of small businesses or migrating: in this way often women became the (only) breadwinners for their families. However the transition also clearly negatively impacted women at different levels: • Health impact: the reduced medical protection appears as the cause of increasing

maternal mortality and of a general raise in infectious diseases, with a likely influence on child morbidity.

• Demographic impact: the “demographic crisis” shown by the decline in birth rates is a consequence of changed reproductive patterns of women. In the soviet period this was mainly due to women’s involvement in production; nowadays it is possibly a reflection of the general socio-economic decline.

• Economic impact: sectors where women were traditionally more represented (light, food processing, chemical industry, as well as State budget) experienced heavy reduction in employment and salaries, and more generally, a lower social status.

The role of women in Georgia is not reflected in the institutional sphere. In spite of the non-discriminatory provisions that exist in Georgian legislation, only an insignificant number of women hold administrative positions and posts in institutions. 1.12 The Issue of IDPs and Refugees: Context and Policies Of the mainly ethnic Georgians displaced from Abkhazia in 1992/93 and from Tskhinvali region 53 about 254,000 persons (circa 72,000 households) remained in Georgia as IDPs. Of these, an estimated 41% live in collective centres (the majority in the Samegrelo and Tbilisi) and 59% in private accommodation. IDPs have usually been regarded as a vulnerable and marginalized segment of the population. Since the beginning they have been targeted for humanitarian assistance by the government and the international community.54 Last year, in a process of dialogue with the GOG, UNHCR,OCHA and the World Bank have launched a "new approach" programme of assistance to IDPs.55 The programme recognises56 the right for the same legal status as other citizens and aims at ensuring equal economic and social opportunities. However, the provision of assistance is considered only within the overall context of vulnerability in the country. According to the WB for instance, some IDPs received in the past a disproportionate share of cash benefits.57 As a baseline for the new approach, a survey was carried out to investigate the actual vulnerability status of IDPs.58 Also, an estimated 17,000 Chechen refugees 59 settled so far in Georgia (mainly into the Pankisi valley in Khaketi).

53 The latter are close to 10,000. 54 Every IDP receives 12 lari/month from the Government plus 2.5 lari for electricity. For those having no employment (officially 83% of the total) humanitarian aid has usually been provided (Sitan p.105). 55 See OCHA, 2000. 56 Absent the conditions for returning safely to their homes. 57 WB Study on poverty, Main Report p. v. 58 IFRC, Tbilisi, Georgia 2000. 59 See IFRC project of emergency assistance to Chechen Refugees. GAI (www.assistancegeorgia.org.ge)

14

1.13 Vulnerability Factors Related to Natural Hazards (including drought) There is very little systematic information on the risk of different natural hazards in Georgia. Apart from scanty and undocumented data on areas at risk by the State Department of Geology (mainly referring to avalanches and landslides), the only effort to compile up-to-date information is reported in Map 1.

Map 1: Hazard Risk Map

Source: Assistance Georgia; Emergency Preparedness and Disaster Response. Georgia Assistance Initiative mapped risks of different nature, ranging from those related to natural events, to industrial hazards. However, no quantitative information is available even in this case. Hence, it is very difficult at present to establish any precise relation between the degree/probability of risk and possible entity of the damage (in terms of human and economic losses). A relative scale of vulnerability can therefore be established only in qualitatively/descriptive terms. In 2000, as several countries of the CIS, Georgia have been affected by a severe drought.60 Chart 10 shows the reduction in rainfall (average for Georgia) over the period March-June 2000, when compared with the three previous years.61

60 Most information on the impact of drought is from the FAO/WFP Crop and Food Supply Assessment, September 2000. 61 Only few meteorological data are available: data collection is not regular due to financial constraints.

15

Chart 10: Total Rainfall during Spring Season 1997-2000

Source: FAO/WFP Crop and Food Supply Assessment, Sept. 2000

The reduction in the spring rains 62 resulted in a total crop failure (80-100%) of rain-fed crops, especially wheat and sunflower in the East, as well as less drastic reductions of yields (30-60%) in many others areas and for crops such as vegetables, grapes, fruits to a lesser extent.63 The next Chart reports figures only for two districts in the South (Kakheti Region),comparing 1999 and 2000:

Chart 11: Precipitation for Kvareli and Lagodekhi

Source: quoted in RAPID Appraisal of Drought in Kakheti Region, August, 2000 SC-GAI Satellite imagery confirmed the very poor crop development, which extended further west and south, as the season progressed. Yields of maize, beans, potato (60-100%) as well as fodder and tea to a lesser extent (30-50%), were consequently also hardly hit. Drought has also adversely affected irrigated crops. Indeed the poor spring rains and snow levels of the preceding winter significantly reduced available water and hydropower: this has had a serious effect on the amount of water available for irrigation. Reported yield reductions for irrigated crops were around 50%. 62 This was coupled with excessively high temperatures, in excess of 40oC, adding up on yield reduction especially for cereals and potatoes. 63 Information on crop yield reductions are from the HFEA Report .

0

20

40

60

80

100

120

140

160

180

May June July

1999

2000

16

1.14 The Agricultural and Food Sector

Georgia is largely an agriculture-based economy, and has traditionally been a net exporter of food products and a major supplier of vegetables, fruits, tea, and wine to the rest of the FSU.

The rural population has been declining over the last 40 years. However it was still around 40% in 1999. The reduction in the period 1960-1970 corresponded to the urbanization policy at the time; the further decline starting from 1998 can be explained by worsening conditions for the agricultural self-employed.64

Chart 12: Incidence of Rural Population over the Total

In section 1.8 definitions and trends in agricultural (self) employment were introduced: in 1998, 48.5% of the employed in Georgia were engaged in agriculture (which corresponds to around 900,000 labour units). After a steady growth in the period 1994-1997, there is nowadays a slight decrease in their number.65 As it was shown in Chart 2, in the worst years of the transition (1992-1995) the GDP share of the agricultural sector went even above 65%; this was mainly related to the decline in all the non-agricultural sectors, and to the consequent “buffer” role provided by the agricultural activities. At present, the GDP share is back to the levels of the early nineties, i.e. around 25-30%. As to the GDP composition: more subsistence oriented crops such as wheat and maize, have clearly increased their importance (the same applies to potatoes and sunflower), while export-oriented crops such as vineyards and tea (the same applies to citrus and tobacco), have been loosing relevance. In the Soviet period, crops and horticulture accounted for around 66% of the total output, while livestock contributed only with a 33%.66

64 See Tacis, p.53 65 Possibly due to yet relatively more favorable conditions of hired labour, or out-migration. 66 IFAD, 1999, p. 6

Rural Population (% over total)

35.0

40.0

45.0

50.0

55.0

60.0

1960

19

70

1980

19

82

1984

19

86

1988

19

90

1992

19

94

1996

19

98

17

At present the situation has reversed completely: in 1998 the share of livestock related production,67 including milk and meat by cattle, sheep and goats accounted for 56%, while crops for 44%.68 Details for the major productions are given in Chart 13.

Chart 13: Gross Value of Production for Major Agricultural Products

As to trends in agricultural output and area cultivated, Chart 14 shows the evolution over the last 30 years; figures have been aggregated for major groups of crops and for all livestock numbers. For grains 69 area planted and production have been decreasing since the fifties, with a minimum in 1993. A slight increase has been observed since then, especially in the case of maize. In the year 2000, according to the crop forecast, production and area planted have fallen to 359.000 ha (- 12%) and 326,000 tons (- 61%) respectively when compared with the period 1996-1999.70 Other annual crops 71 have increased substantially over the same period, especially in terms of production (reflecting a remarkable increase in yields/ha). There are no estimates available for the year 2000. Crops which were traditionally meant for export markets (tree crops such as tea, vineyards, citrus) have decreased both in area and (more drastically), in production, also indicating a sharp reduction in yields/ha. Hazelnut is the only crop which has increased in importance (both area and production) over the last years. 72 Figures concerning livestock numbers show a different pattern depending on the type of livestock. While, especially for small stock (sheep and goats) and cattle in general, there has been a substantial reduction in the number of heads, this is not the case for milking cows, which remained stable over the period considered.73

67 Expressed as total gross value of the agricultural production, valuing the products at farm-gate prices (Source: WFP/VAM). 68 Grains, vegetable, potatoes, e legumes. 69 Including maize, wheat, other cereals. 70 See FAO, 2000 71 For domestic consumption (sunflower, vegetables) and both domestic consumption and export (potatoes). 72 Tacis, p.16 73 As it will be discussed later, milking cows are crucial in the present subsistence rural economies.

GVP share

8%18%

19%8%8%2%

36%1%

Grains P otatoes , vegetables , sunflowerTree crops M eat, beefM eat, pork M eat, m uttonM ilk , cow M ilk , sheep and goats

18

Chart 14: Trends in Area Cultivated and Production for Grains

Source:SDS quoted in Didebulidze, 1997 and FAO, 2000

For most of the crops the decreased production is not just an effect of decreasing cultivated areas but also of a substantial fall in yields; as it is better shown in Chart 15, this is especially true for export crops (not for grain crops) and also applies to livestock production.

Chart 15 : Trends in Yields

Source:SDS quoted in Didebulidze, 1997 and FAO, 2000

Grains

0100200300400500600700800900

1000

1970 1988 1991 1993 1995 1996 1997 1998 1999

Production ('000 tonnes)

Area ('000 ha)

Other annual crops (sunflower, potato, vegetables)

0

200

400

600

800

1000

1200

19701988

19911993

19951996

19971998

1999

Production ('000tonnes)

Area ('000 ha)

Export (tree) crops

0200400600800

100012001400160018002000

1970 1988 1991 1993 1995 1996 1998

Production ('000 tonnes)

Area ('000 ha)

Livestock numbers

-

500

1,000

1,500

2,000

2,500

1970

1988

1991

1993

199519

96199

7199

8199

9

of which m ilk ing cows('000)

Cattle heads ('000)

Sheep & Goats ('000)

Potatoes and Vegetables

8000

10000

12000

14000

16000

18000

1970 1988 1991 1995 1996 1997 1998 1999

Kg/

ha

Potatoes Vegetables, legumes

Grains and Sunflowe r

0

500

1000

1500

2000

2500

3000

3500

1970 1988 1991 1995 1996 1997 1998 1999

Kg/

ha

Maize W heat Sunflower

Tea, Grapes, Citrus

0

5000

10000

15000

20000

25000

30000

1970 1988 1990 1995 1996

Kg/

ha

Tea

Grapes

Citrus

0

50

100

150

200

250

1970 1988 1990 1995 1996

Kg/

cow Milk per cow

Calf per cow

19

Food Industry: the food (and beverage) industry has also suffered a dramatic decline since the early nineties. The wine industry has decreased its production by a factor of four, the canning industry by 30 times, processed tea by 98 times, meat and milk products by 45 and 29 times respectively.74 Women were predominant in the food industry and have been hardest hit by the deterioration in this sector. The forestry industry, also a sector which provided employment in the rural areas, has reduced substantially its operational capacity. Rural infrastructures: there is a tradition of land improvement through irrigation and drainage in Georgia. Major investments were made during the Soviet period. This resulted in a total irrigated area of about 411,000 ha at the beginning of the 1980s. In 1996, irrigation covered 469,000 ha. In 1998 the area actually irrigated was estimated at 270,300 ha, which is only 58% of the earlier figure.75 In 1990, the total drained area was estimated at around 163,000 ha. In 1998 it fell to around 82,000: around 50% of the original area. Drainage has been developed mainly in the high rainfall region of western Georgia (Kolkhety lowland), on 132,940 ha.76 No data on how much is presently drained are available, although only 15% of the pumping stations are operational. The reduction in the irrigated and drained areas was caused partially by equipment damaged/stolen during the civil war; also the high cost of energy made the operation of pumping stations prohibitive. The degree of mechanization has decreased sharply, as there were practically no imports since the early nineties: it is therefore nowadays a major constraint for farming practices.77 An even more drastic reduction applies to the use of agricultural inputs (fertilizers, chemicals). Electrification in agriculture and rural areas at large reached its maximum in 1990 (8.4 % of the country’s consumption); a drastic decrease (to 3.9%) was observed in the most recent years. No systematic information is available on the state of roads in rural areas. It appears however that maintenance of the existing network, let alone any development in the mountain areas of the country, has been very limited. The total cultivable land 78 was estimated in 1996 at some 3.2 million ha, or 43% of the national territory. About 2.2 million ha are forest. The cultivated land is estimated at 1.06 million ha, of which 29% of permanent crops and 71% of annual crops. Starting from 1992 a land privatization process has been undertaken.79 The process aimed at the creation of two forms of land tenure: ownership by families as well as lease of state-owned land by physical or legal entities. In the initial intentions the two would have developed a small-holders sector and a commercial sector (more market-oriented).

74 Didebulidze, 1997, P.26 75 Figures on irrigation and drainage are from GOG: Georgian National Food Security Policy Framework, August 1999 76 The total area of Kolkhety which would require the development of drainage infrastructure, is about 800 000 ha. 77 Most of the machinery inherited from Soviet times is now held by former employees of the collective farms, which now also often happen to be among the large leaseholders. 78 In SDS definition this is equal to the agricultural area 79 A land tax is due by the owner which is estimated (at least theoretically), according to the Soviet classification system. Such system was judged to be often far from the present reality. In their survey Koechlin and Mariannick (p.20) found that the land tax was on average around 20 GEL/ha/year for arable and perennial land, around 2 GEL/ha/year for pastures and mowing land.

20

Of the total agricultural land (3.2 million ha), some 0.9 million ha are now privatized and cultivated by small holders; 0.3 million ha is state-owned land which has been (officially) leased; while 2 million ha is state-owned land which has neither been privatized nor leased (“set-aside”).80 Within the privatized land the distribution by land type is as follows: 81

Chart 16: Share of Privatized Land by Type

Source: Georgian National Food Security Policy Framework Perennials were privatized the most (with the exception of tea in West Georgia), followed by arable land. Mowing land and especially pasture land were privatized less (being leased or managed collectively by villages). Forest land remains fully under the ownership of the State. Large differences in the extent of the process appear when comparing Sakrebulos and especially Districts,82 due to physical conditions (mainly availability and quality of land) as well as political considerations and special locations.83 For the above reasons the initially intended allocations84 were rarely achieved: on average the privatized plot size is below one hectare per household.85 In each Sakrebulo however, the process resulted in a relatively homogeneous distribution of land (the process being largely decided at Sakrebulo level).86 As a consequence differences among the allocated plots are not so much related to their size but rather to land quality, access to water and distance to settlements. Privatized land can be leased out to other individuals, although this is not frequent and refers to small areas. Sharecropping is usually applied in this case. 80 This set-aside land is reportedly either left to collective management (mostly graze-land) or to research, or leased-out informally (e.g. through temporary use agreements set at Sakrebulo level); it has been estimated that this form of lease accounts for 18% of total arable/perennial and mowing land (see Georgian National Food Security Policy Framework: Annex II p.4-5). 81 As on 1/4/99. 82 Koechlin Jean, Jegat Mariennick (1999) Survey on Land Privatization Process in Georgia. EU FSP in Georgia and SDLM. 83 For example the proximity to international borders is the official reason for the limited privatization in Marneuli District. 84 In principle the allocation was set at up to 1.25 ha for formers Kovkhoz and Sovkhoz workers (and since 1996 also teachers) 0.75 ha for other residents (state workers) in the villages, 0.25 to non-residents formerly farming in the village, 0.15 to other non-residents (See Koechlin and Mariannick, p.13) 85 If in Kvareli District the privatized holding is 1,27 Ha/family, in Marneuli it only reaches 0.3 ha/family. 86 When land was available allocations tended to be similar for all beneficiary categories; a stricter application of size allocations per category was enforced in case of shortage of land.

Arab

le la

nd

Pere

nnia

l lan

ds

Mow

ing

Land

Past

ures

Fore

sts

Privatized

54 67 28 4 0

0204060

80

100

in %

PrivatizedNot Privatizedc

Percentages:

21

As to state-owned land which is leased, the types of leases vary widely:87 • Small leases (< 5 ha) to physical persons (family farms), which are also usually on a

short time basis;88 Koechlin and Mariannick found that around 20% of the small holders are leasing-in small amounts of land.89

• Intermediate leases (up to 100 ha) to physical persons; average duration is up to 10

years. • Large leases (up to 500 ha or more) to physical persons (which tend to resemble

anyhow to agro-firms) or Legal Entities created from the restructuring of Kovkhoz/Sovkhoz or as new corporations; in this case the leases are usually long term;90 the land received on lease is often only partially farmed, the remaining being “set-aside” or sub-leased to small farmers;91 the terms are often very unfavourable for those who sub-lease, the rates being reportedly well in excess of those paid by the primary leaseholders.92 Koechlin and Mariannick reported that around 25% of the small holders interviewed were sub-leasing from large leaseholders.

The present situation reflects indeed the dualism originally envisaged in the land tenure reform. However, on the one end the small-holder sector has clearly evolved towards a mainly subsistence agriculture, being constrained by the limited access to a number of key productive factors (to land, notwithstanding the privatization process, as well as to mechanization and credit) and by depressed market demand and prices. On the other end, a class of landowners (mostly large leaseholders) is emerging which clearly combines some farming with land speculation, by setting aside land and/or collecting rents from sub-leases. Somewhere in between a class of more commercially oriented, “professional” farmers is slowly developing, which has been able to establish viable enterprises.93 The elimination of the present constraints and the growth of the whole agricultural sector depends on the success of specific policies, among others:94 � land policy (expanding the land privatization and registration processes and preventing

of purely speculative forms of lease) � rural infrastructure and service policy (rehabilitation of irrigation and drainage networks,

development of rural credit, mechanization and extension/training services, etc.) � market policy (re-orientation of cropping patterns, improvement in post-harvest

processing, improved market information, etc.).

87 Differently from privatization the allocation of lease-land is run at the district level . Many suggest that the procedure is not transparent and in the past favoured specific groups ( former state and collective farm managers) in terms of allocation of best /irrigated land, period and rate of lease. 88 Usually for one year only. These leases also occur unofficially (not registered at the Districts) on land which is formally “set-aside”, often by “temporary use” agreements. 89 Forms of lease also include co-operatives and groups of farmers: in these cases the lease involves large areas. However, the land is managed individually. 90 In their Rapid Appraisal, SC/USAID found that in Imereti, Guria, Samegrelo 49 year leases are not infrequent. 91 Sub-leasing is now allowed by the Civil Code. 92 See for instance Rapid Appraisal by SC/USAID, p.10. 93 Rapid Appraisal by SC/USAID, p.8 94 Some of the policies above have been outlined in the Food Security Policy Framework, set by the GOG in conjunction with the EU (see Georgian National Food Security Policy Framework).