Are Georgian farmers willing to break the mental block and establish modern agricultural cooperatives?

TOPIC 13 - STAGE 1 - MACRO After the collapse of the national economy in 90-ties of the last century, Georgian farmers typically cultivate small plots of land of average area about 1.2 hectares. This create ‘curse of... [ view full abstract ]

TOPIC 13 - STAGE 1 - MACRO
After the collapse of the national economy in 90-ties of the last century, Georgian farmers typically cultivate small plots of land of average area about 1.2 hectares. This create ‘curse of smallness” preventing smallholders from exploiting their productivity due to barriers in market access. The possible solution to this problem – increasing economies of scale through establishment of cooperatives – is significantly stigmatized among farmers by the recent era of forced collectivization when Georgia was part of the Soviet Union.
Modern types of agricultural cooperatives are being established in Georgia by ENPARD initiative of European Union among other donors. Under this program 11 newly established cooperatives, representing 84 farmers in western part of Georgia, were analysed. The main aim of the research is to explain diversity among newly established cooperatives and to analyse internal and external factors which are crucial for farmers’ decision whether to form the cooperative or not. Social capital plays crucial role in the analysis.
In order to find out main factors of cooperatives’ establishment two groups of respondents were questioned; target group consists of 39 cooperative members while 21 farmers who actively considered their involvement in donor grant application but then withdrew represent control group. The econometric model based on probit analyses showed maximum likelihood of all factors to influence farmers’ choice to participate in cooperatives.
Results demonstrate importance of bonding social capital and membership of more family members and family ties within new cooperatives. Also, there are strong indications that the decision to establish producer group has been driven by expectation of financial support rather than by self-initiative. Disproportional distribution of cooperative members' shares implies potential dominance of leading members and presence of "sleeping members" who are registered without having real interest in cooperative.
Other driving forces of cooperatives formation are international donors' support and supportive state policy, such as promised advantageous taxation and legislation. Also younger farmers who do not have negative experiences with Soviet "kolkhozes" are more willing to participate in cooperatives. On the other hand remoteness of farmers and high income inequality among farmers adversely influence horizontal integration of Georgian farmers.