Weak integration of emergent smallholder farmers and agri-businesses is one of the most critical constraints to agricultural sector growth in Georgia. Given the prevalence of small-scale farming, a key challenge for established buyers (processors, wholesalers, exporters, intermediaries) of farm products is to obtain the right quality in sufficiently large volumes of acceptable quality inputs from small scale farmers, often incurring high transactions costs of working with many individual smallholders.

Moreover, on one hand linkages between farmers and buyers are mostly informal and are based on spot market cash transactions. On the other hand, farmer-or producer-based organizations (such as associations and cooperatives) that could have facilitated linkages between smallholders and buyers are lacking in Georgia. Women tend to be also under-represented in producer organizations, where those exist.

Overall, existing agricultural value chains integration mechanisms in Georgia fall short of pulling smallholder farmers in and up the value chain. Across the spectrum of arrangements to enhance cooperation amongst agricultural value chain actors in Georgia, supply chain integration arrangements stand at the most formalized end. Spot market arrangements, which are the most prevalent, stand at the other end of the spectrum. Between the two ends are experiences with producer organizations that at best are mixed, and with contractual links, such as contract farming arrangements, which in general have not been positive where tried.

Low skills and poor infrastructure compound the difficulties of integrating along the agricultural value chains.

Constraints and opportunities in the agriculture, water, and land sectors are interlinked, and cannot be addressed in isolation in Georgia. Land and water are finite resources and factors of production on which agricultural production and productivity depends.

While agriculture in Georgia is primarily rainfed, I&D investments are vital to guard against climatic extremes and are critical for high-value agriculture production.

Significant steps have been taken by the Government of Georgia, including the rehabilitation of a large part of the main canal systems, and in some areas secondary and tertiary irrigation systems, expanding the irrigable area from 88,000 hectares in 2015 to about 130,000 hectares in 2020. The Irrigation Strategy for Georgia for 2017-2025 has a goal to increase the total irrigated area to 200,000 hectares by 2025. According to Georgian Amelioration (GA), the national irrigation agency the main irrigation service provider in Georgia, there were a total of 23 irrigation schemes under use in 2020. Thus, as of 2020, although a total of 30,000 hectares is available for irrigation, only about 65,000 hectares is publicly irrigated.

However, the ongoing reconstruction of existing irrigation schemes alone will not suffice to improve service delivery to targeted areas as the availability of irrigation water becomes a limiting factor with the increasing impacts of climate change.

The ability to increase the agricultural sector’s contribution to economic growth, create employment, and contribute to poverty reduction is directly linked to the availability of adequate, reliable, timely, and affordable I&D services. Irrigated agriculture is, on average and globally, at least twice as productive per unit of land as rainfed agriculture, thereby allowing for more production intensification and crop diversification (Box 1)