#20 Armenia Agriculture Bulletin, BFC

01/2017

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20 A rm e n i a Agriculture Bulletin Processors develop timetable to repay debt to farmers EBRD discusses further agricultural development Mining’s impact on Armenian agricultural production 2017 fruit and vegetable exports over two thousand tons

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Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5)

Agriculture Minister discusses modern farming equipment ........................................................... 2 Processors develop timetable to repay debt to farmers................................................................. 2 Government discusses Gegharkunik business projects .................................................................. 2 Ministry of Agriculture examines anti‐hail solutions ...................................................................... 3 Intergovernmental group discusses irrigation issues ...................................................................... 3

Foreign Aid ................................................................................................................. 3 6)

EBRD discusses further agricultural development .......................................................................... 3

Private Sector .............................................................................................................. 4 7) 8) 9) 10) 11) 12) 13)

Mining’s impact on Armenian agricultural production ................................................................... 4 Armenia, Iran expanding business cooperation .............................................................................. 4 Producers owe AMD 105 million for 2015 grape purchases ........................................................... 4 2017 fruit and vegetable exports over two thousand tons ............................................................. 5 Armenian wine seeks market diversification .................................................................................. 5 Arab and European investors interested in Armenia ...................................................................... 5 Salt and sugar production volumes increased in 2016 .................................................................... 5

Note: The Agriculture Bulletin presents a monthly roundup of headlines and news stories related to Armenia’s agricultural sector.

This bulletin is prepared by Business & Finance Consulting—a Swiss‐based development finance consulting company with a long history of working in Eastern Europe, Central, South and South East Asia and North Africa. Currently, BFC is implementing the “Financing the Agriculture Sector in Armenia” project for KfW. Read more »

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BFC Agriculture Bulletin

State Initiatives 1)

Agriculture Minister discusses modern farming equipment

January 28th, 2017, http://www.panorama.am/en/news/2017/01/28/Minister‐of‐Agriculture/1717235

Agriculture Minister Ignati Arakelyan met with representatives from a number of Russian companies specialized in the production of agricultural machinery to discuss the possibility of replacing out‐of‐date agricultural machinery in Armenia with modern equipment. The Minister noted that the lack of modern farming technology and equipment is constraining harvests and one of the biggest obstacles facing Armenia’s agricultural sector in general.

During the meeting, the Minister presented a program for obtaining agricultural machinery through leasing which will be partially subsidized by the state. The Minister believes that such a program could increase agricultural productivity by 20‐30%.

2)

Processors develop timetable to repay debt to farmers

January 14th, 2017, http://www.panorama.am/en/news/2017/01/14/Processing‐companies‐develop‐timetables‐to‐pay‐ farmers%E2%80%99‐debt/1708970

Agriculture Minister Ignati Arakelyan met with representatives of a number of Armenian processing companies to discuss unfulfilled financial obligations to farmers. The Minister stressed that the companies should pay their debts within strict deadlines and that farmers should have no concerns other than continuing to provide quality agricultural goods.

Processing companies owe a debt of over AMD 1.5 billion to farmers for goods provided in 2016 and another AMD 105.6 million for goods provided in 2015. Representatives of the processing companies assured farmers that the debt will be repaid and have developed timetables to pay the total accumulated debt to farmers.

3)

Government discusses Gegharkunik business projects

January 11th, 2017, http://finport.am/full_news.php?id=27873&lang=3

The government of Armenia met to view and discuss presentations on business projects for the Gegharkunik region. The projects aim to enlarge and develop the dairy industry and agricultural production as well as attract investors for the implementation of programs in the region. Prime Minister Karen Karapetyan also noted that the government will co‐finance and assist prospective programs which are economically feasible.

At the end of the meeting, the Prime Minister instructed the Ministry of Agriculture, the Ministry of Economic Development and Investments and the Central Bank to study the possibilities of providing assistance to programs that have been already approved. It is also planned that the Central Bank will help create a platform to provide business training for Armenian entrepreneurs.

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BFC Agriculture Bulletin

4)

Ministry of Agriculture examines anti‐hail solutions

January 11th, 2017, http://www.mes.am/en/news/item/2017/01/11/gyuxnax/

In order to help prevent and minimize the losses Armenian farmers face every year due to hail, Agriculture Minister Ignati Arakelyan convened a meeting to discuss anti‐hail measures the government could enact. To this end, the Ministry of Agriculture drafted a concept note of climatic disasters and loss prevention and also met with representatives from the Ministry of Emergency Situations.

At the meeting, the Ministry of Emergency Situations stressed the need to upgrade the technologies of and improve communications between monitoring stations, including the need for a centralized service to disseminate information and make decisions. The sides decided to explore anti‐hail rocket technologies to see if they would be a feasible solution for Armenia and hope to include their expenses in the 2018 state budget.

5)

Intergovernmental group discusses irrigation issues

January 10th, 2017, http://minagro.am/2017/01/%D5%B0%D5%

Agriculture Minister Ignati Arakelyan met with representatives from the Ministry of Energy and Infrastructure, the Ministry of Water, the State Committee on Real Estate and Natural Resources and the State Committee on Territorial Management and Development to discuss ways to improve the country’s irrigation system as well as issues of water availability and accessibility. At the meeting, Minister Arakelyan briefed attendees on the concerns often raised by citizens.

The group discussed increasing the efficiency of irrigation methods and the potential of drip irrigation systems as a solution. The group also discussed the need to create a database of unused agricultural land and stressed the need for land consolidation in order to more effectively manage water resources.

At the end of the meeting, the group decided to establish a working group to further study the issue and report back to the government with recommendations.

Foreign Aid 6)

EBRD discusses further agricultural development

January 19th, 2017, http://minagro.am/2017/01/%D6%84%D5%B6%D5%B6

Deputy Agriculture Minister Armen Harutyunyan met with Dutch team leader Frans Vickers of the European Bank for Reconstruction and Development (EBRD) and the Ambassador of the Kingdom of the Netherlands, Johannes Daum to consider additional possibilities for cooperation in developing Armenia’s agricultural sector.

Deputy Minister Harutyunyan briefly presented on the developments of recent years, the main macroeconomic indicators and the main directions of government policy and strategic development as well as the results of previous and ongoing cooperation with international organizations. He noted that Armenian agriculture still has a large untapped potential and that the government attaches great importance to major investment projects which bring knowledge, high technologies, jobs and access to new markets, particularly in regards to the development of greenhouses, intensive orchards, the berry industry, the processing industry and modernization of the dairy industry.

For his part, Mr. Vickers wants to become better acquainted with the different sectors of Armenia, including agricultural policy and development trends and challenges. The EBRD representative added that EBRD is interested in investing in and finding reliable partners in the food processing industry and is open to discussing the possibility of direct financing.

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BFC Agriculture Bulletin

Private Sector 7)

Mining’s impact on Armenian agricultural production

January 30th, 2017, http://en.a1plus.am/1254994.html

Seyran Minasyan, senior researcher at the Institute of Physics, and environmentalist Karine Danielyan have met with Health Minister Levon Altunyan to discuss potential issues arising from mining and its impact on the environment. The pair used the example of the Amulsar gold mine and its potential effects on the surrounding agricultural zones of Vayk and Sisian as an example of why mining should not occur until its effects can be fully understood and proven. While the chemical effects on plants and wild vegetation has yet to be fully examined, it is estimated that 100% of agricultural production is saturated with heavy metal of one kind or another. The case with Amulsar is particular alarming since mining efforts there could be harming the priceless Jermuk mineral waters.

Following the meeting, Minister Altunyan agreed to support greater efforts to sustain the environment, especially given that Armenian economic development, especially tourism and eco‐tourism, is bolstered

by Armenia’s natural landscapes.

8)

Armenia, Iran expanding business cooperation

January 27th, 2017, https://news.am/eng/news/370042.html

Since horticulture is highly developed in Armenia, Iranian businessmen have suggested opening joint ventures in free economic zones in Armenia. The idea would lead to raw materials from Armenia being packaged with Iranian technology and packaging but also being able to be imported into Eurasian Economic Union (EEU) countries without duty. Armenian Beer is already taking advantage of opportunities with Iranian counterparts by agreeing to export nuts and diatomite powder (frequently used in beer production) to Iran.

Such arrangements are hoped to encourage more organized exports from Armenia to Iran and lead the way to greater trade between the two countries.

9)

Producers owe AMD 105 million for 2015 grape purchases

January 19th, 2017, http://finport.am/full_news.php?id=27995&lang=3

The total debt of processing plants to farmers for grapes purchased in 2015 stands at over AMD 105 million, with Vinar LLC owing AMD 84 million of that amount. To help farmers recover the owed debts, the Ministry of Agriculture has appealed to the General Prosecutor's Office, which is now studying the case in order to bring it to legal resolution. The Ministry is also planning to help a few companies pay off their debts with loans but notes that Vinar LLC’s outstanding debt is problematic.

According to Ministry data, processing enterprises procured grapes for AMD 31.5 billion in 2015. As of December 21, 2016, approximately 50 companies had purchased 109.8 thousand tons of grapes in 2016 at a price of AMD 128.8 per kilogram, AMD 16.3 lower than in 2015.

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BFC Agriculture Bulletin

10) 2017 fruit and vegetable exports over two thousand tons January 19th, 2017, https://armenpress.am/eng/news/875263/armenia‐exports‐over‐2‐thousand‐tons‐of‐fruits‐and‐ vegetables‐since‐start‐of‐the‐year.html

More than 2,000 tons of fruits and vegetables have been exported from Armenia in the first few weeks of 2017, far exceeding fruit and vegetable export numbers for the entire month of January in any year in the last two decades. The main exports have been purveyed grapes and greenhouse tomatoes, mostly headed to the Russian market.

11) Armenian wine seeks market diversification January 12th, 2017, http://en.a1plus.am/1253873.html

Avag Harutyunyan, chairman of the Armenian Winemakers Union, believes that the Eurasian Economic Union (EEU) is the wrong market for Armenian wine because it is a market of cheaper goods that Armenia is not capable of producing. Mr. Harutyunyan noted that Russia and the rest of the EEU would be a great market if Armenian wines could be produced for USD 1 – 1.5 per bottle; however, Armenia’s wine currently has a sales price of USD 1.5, meaning that only around 2 million bottles are exported to major markets like Russia annually.

Mr. Harutyunyan has called for greater diversification of markets for Armenian wine and points to China’s work with Georgia as an example of what Armenia should be striving for. The problem is that Armenia, as a member of the EEU, cannot separately negotiate with China and needs to have the EEU conduct negotiations with them.

12) Arab and European investors interested in Armenia January 10th, 2017, http://www.lragir.am/index/eng/0/economy/view/36690

Several companies from various countries are interested in investment opportunities in different spheres of Armenia’s economy, including agribusiness (canned foods and modern greenhouses), mining and solar energy. Surprisingly, these investors are not from Eurasian Economic Union (EEU) member states as many would suspect but rather include European, Kuwaiti and Iranian investors. Russian investors are expected to stay within the usual narrow spheres of investment they make, and there is little chance of investment from other EEU or Commonwealth of Independent States (CIS) member states. Enterprises and individuals from other countries, however, have already rented land, established production and are creating jobs for Armenian citizens.

The European, Kuwaiti and Iranian investments bring hopes for Armenia to expand its export markets to include not only EEU and CIS countries but also European and Arab ones.

13) Salt and sugar production volumes increased in 2016 January 4th, 2017, http://www.panorama.am/en/news/2017/01/04/Salt‐sugar‐production‐volume‐increased‐ Armenia/1704239

According to data from the National Statistical Service of Armenia, salt production between January and November 2016 amounted to 25,865.1 tons, a 5.6% year‐on‐year increase. The volume of sugar produced also increased over the same period by 1.7% to a total amount of 54,119 tons. It should be noted that, with the exception of salt and sugar, the volumes of essential food products showed a decrease in 2016.

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Prepared by Business & Finance Consulting (BFC) www.bfconsulting.com In this bulletin, BFC provides extracts from articles that have been published by others and as a result cannot be held responsible for such content.

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