12/2015
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7 A rm e n i a Agriculture Finance Bulletin Agriculture Sector Looks to Profit from Russian Ban on Turkish Products Farm Employees Receive AMD 900 Million in State Assistance Agribusiness and Agro-Tourism to Benefit from World Bank Package Agriculture Output Grows 14.5% in First 11 Months of 2015
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Agriculture Finance Bulletin Edition #7, December 2015
Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11)
Farms in 142 Communities Run as Cooperatives ............................................................................ 2 70,000 Loans Worth AMD 70 billion Disbursed Through Agri-Lending Program ............................ 2 All Agricultural Loans to have Fixed Interest Rates ......................................................................... 2 Farm Employees Receive AMD 900 Million in State Assistance ...................................................... 2 Parliament Passes Bill on Agricultural Cooperatives ....................................................................... 3 Brandy Producers Exempted From Grape Press Technology Law................................................... 3 Armenia Joins CIS Seed and Seedling Research Program ................................................................ 3 Greenhouse Expansion Satisfies Domestic Tomato Demand.......................................................... 3 Sheep and Goats to be Exported to Jordan ..................................................................................... 3 Agriculture Sector Looks to Profit from Russian Ban on Turkish Products ..................................... 4 Minister of Agriculture and US Ambassador Visit Agribusiness Teaching Center ........................... 4
Foreign Aid ................................................................................................................. 4 12) 13) 14) 15)
Agribusiness and Agro-Tourism to Benefit from World Bank Package ........................................... 4 OSCE Organizes Conference on Armenian Agri-Product Export Potential ...................................... 5 EUR 3.3 Million Organic Agriculture Support Program Launched ................................................... 5 6-Year Rural Finance and Infrastructure Development Program Launched ................................... 5
Private Sector.............................................................................................................. 6 16) 17) 18) 19) 20)
Agricultural Output up 11.6% to AMD 931.4 Billion ....................................................................... 6 “Increase Potato Cultivation to Meet Sanction-Related Surge in Russian Demand” ...................... 6 Agriculture Output Grows 14.5% in First 11 Months of 2015 ......................................................... 6 Zhamanak: Turkish Products Flooding Domestic Market Following Sanctions ............................... 6 “Fruit and Vegetable Exports to Russia Could Reach 150,000 tons” .............................................. 7
Note: The Agriculture Finance Bulletin presents a monthly roundup of headlines and news stories related to investments and financing flows 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. BFC Max-Högger-Strasse 6 CH-8048 Zurich, Switzerland
Phone: +41 44 784 22 22 Fax: +41 44 784 23 23
info@bfconsulting.com www.bfconsulting.com
BFC. Agriculture Finance Bulletin.
State Initiatives 1)
Farms in 142 Communities Run as Cooperatives
December 29th, 2015, http://arka.am/en/news/business/some_142_communities_in_armenia_run_livestock_cooperatives/
Farms in 142 rural communities are run as cooperatives, with a further 50 rural communities reorganizing as cooperatives in 2016, according to Minister of Agriculture Sergo Karapetyan. Agricultural development depends on the creation of cooperatives, with cooperative farms seeing an 18%-20% increase in livestock productivity and 75% fodder self-sufficiency, according to the Minster. Cooperatives were provided with 740 units of subsidized agricultural machinery - including 165 tractors – with 80% of total costs covered by the state, added Karapetyan. Armenia has 3,040 farms.
2)
70,000 Loans Worth AMD 70 billion Disbursed Through Agri-Lending Program
December 28th, 2015, http://arka.am/en/news/business/some_70_000_agricultural_loans_provided_this_year/
Some 70,000 agricultural loans worth AMD 70 billion were distributed through the state agri-lending program, according to Chairman of the Central Bank Arthur Javadyan. International financial organizations implemented the program, added the Chairman. The program was complemented by a EUR 50 million small and medium enterprise (SME) support fund, disbursed in partnership with the European Investment Bank, said Javadyan.
3)
All Agricultural Loans to have Fixed Interest Rates
December 22nd, 2015, http://arka.am/en/news/economy/agricultural_loans_in_armenia_to_be_provided_at_fixed_interest_rates/
Amendments to the consumer credit law require agricultural loans to have fixed interest rates, instead of nominal rates, announced Deputy Minister of Finance Pavel Safaryan. Due to low levels of financial literacy amongst the rural population, the nominal rates – subject to change throughout the loan period – were causing further difficulties for vulnerable farmers. The amendments will apply to agricultural loans below AMD 2 million, said the Deputy Minister. By the end of November, agricultural lending in 2015 stood at AMD 136.56 billion, a 4% drop year-onyear.
4)
Farm Employees Receive AMD 900 Million in State Assistance
December 22nd, 2015, http://armenpress.am/eng/news/830455/state-employment-agency-assisted-more-than-four-millionfarmers.htmlA
An additional 4,793 farms have received assistance via the Farm Assistance Project, bringing the total to 6,285 beneficiaries, according to the Director of the Employment Agency, Artak Mangasaryan. Farm employees receive assistance for each day worked– with family members receiving AMD 4,000 per day, and other employees receiving AMD 3,000 per day. Total disbursement to a single farm cannot exceed AMD 350,000, said the Director. The project budget totals AMD 1.13 billion, with more than AMD 900 million disbursed to famers to date. Shirak province has the greatest number of beneficiaries, followed by Kotayk, Argatsotn and Voyots Dzor, according to Mangasaryan. Page 2
BFC. Agriculture Finance Bulletin.
5)
Parliament Passes Bill on Agricultural Cooperatives
December 21st, 2015, http://news.am/eng/news/303174.html
A bill on agricultural cooperatives was passed into law. Members will receive joint property rights, leading to a reduction in the costs. Cooperatives will collect membership fees. This bill specifies the concept of an “agricultural cooperative.� In particular, it is noted that the members of such cooperatives in Armenia can benefit from their joint property, and through the latter, they can produce goods and also purchase them at reduced prices. These agricultural cooperatives operate on the account of membership fees.
6)
Brandy Producers Exempted From Grape Press Technology Law
December 14th, 2015, http://news.am/eng/news/301959.html
Following amendments to the Grape-Based Alcoholic Beverage Law, brandy producers will no longer be obliged to replace air bladder grape presses with other technologies by 2017, announced Deputy Minister of Agriculture Robert Makaryan. Producers will have discretion over grape press technology, as research shows that the press-type does not affect brandy quality, according to Makaryan.
7)
Armenia Joins CIS Seed and Seedling Research Program
December 14th, 2015, http://news.am/eng/news/301833.html
Armenia has joined the Commonwealth of Independent States (CIS) seed and seedling selection and genetics research sharing program. The program was launched in Minsk, Belarus, in May 2013.
8)
Greenhouse Expansion Satisfies Domestic Tomato Demand
December 10th, 2015, http://www.yerkramas.org/article/98792/zamministra-armenii-bolshe-ne-nuzhny-importnye-pomidory
Through 2014-2015, 83 hectares of greenhouses equipped with intensive cultivation technology were erected. As a result, domestic demand for tomatoes has been met, according to Deputy Minister of Agriculture Samvel Galstayan. Armenia now exports 1,170 tons of tomatoes, as well as 3,280 tons of cucumbers, added the Deputy.
9)
Sheep and Goats to be Exported to Jordan
December 4th, 2015, http://arka.am/en/news/business/armenia_plans_to_export_sheep_and_goats_to_jordan/
Director of the State Food Safety Service Armen Hayrapetyan met with a Jordanian delegation to discuss the export of Armenian sheep and goats to the country, as well as other Arab nations. It was agreed that further negotiations were needed and that relevant state authorities from both countries could mediate between commercial parties. The livestock sector has great potential in Armenia, according to Hayrapetyan. Page 3
BFC. Agriculture Finance Bulletin.
10) Agriculture Sector Looks to Profit from Russian Ban on Turkish Products December 3rd, 2015, http://www.armenianow.com/economy/68294/armenia_turkey_russia_trade_goods_sanctions
From January 1, 2016, Russia will ban the import of frozen poultry products, fresh and frozen vegetables, salt and flowers from Turkey. The sanctions follow Turkey’s recent downing of a Russian military aircraft. The Armenian government discussed how best to fill the gap with local produce. There is skepticism, however, as to whether the situation can be exploited. The ruble’s 20% devaluation continues to affect profit margins, with exports to Russia decreasing. Moreover, Armenia simply does not produce the requisite quantities of meat, fish, fruits and vegetables to replace Turkish imports, with most of domestic output consumed locally, according to economist Ashot Yeghiazaryan. Director of Ararat Food Hamel Tadevosyan said Russian companies have shown interest but agrees that, while quality is not a problem, Armenia simply does not have the requisite output. Finally, transportation issues remain unresolved, added Yeghiazaryan. There are also related concerns that the cheaper Turkish goods may end up in Armenia instead, via Georgia and Azerbaijan. Exports to Russia decreased 29.4% in the first 10 months of 2015, with trade turnover falling 14.8%, according to the National Statistical Service. During the same period, total exports fell 2.2% while total imports fell 26.6%.
11) Minister of Agriculture and US Ambassador Visit Agribusiness Teaching Center December 1st, 2015, http://armenpress.am/eng/news/827866/sergo-karapetyan-highly-appreciates-agribusiness-teachingcenter%E2%80%99s-work.html
Minister of Agriculture Sergo Karapetyan and US Ambassador Richard Mills visited the Armenian National Agrarian University’s Agribusiness Teaching Center. Karpetyan and Mills praised the quality and importance of the Center – launched 15 years ago with US assistance – with the latter remarking the establishment’s draw to local and foreign students alike is testimony to its excellence.
Foreign Aid 12) Agribusiness and Agro-Tourism to Benefit from World Bank Package December 23rd, 2015, http://www.armradio.am/en/2015/12/23/wb-approves-us55-million-loan-for-armenias-local-economydevelopment-project/
In 2014, the World Bank helped the Armenian government identify opportunities for regional development across the sectors that most drive growth and job creation: notably, agribusiness, agrotourism, and other tourism. Following the study, the World Bank approved a USD 55 million loan to the Local Economy and Infrastructure Development Project (LEIDP) to upgrade Armenia’s tourism related infrastructure and institutional capacity. The project will also invite private entities with interest in Armenian tourism or agribusiness to invest in public infrastructure related to their investments.
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BFC. Agriculture Finance Bulletin.
13) OSCE Organizes Conference on Armenian Agri-Product Export Potential December 22nd, 2015, http://www.osce.org/yerevan/212191
A conference on the diversification and expansion of agricultural export markets – organized by the Ministry of Economy and the Organization for Security and Cooperation in Europe (OSCE) – was held on December 21 in Yerevan. The event hosted 40 representatives from state institutions, businesses, and local and international organizations. Participants discussed the potential of Armenian agricultural products on foreign markets, focusing on a Center of Economic Research and Development Support (ERDSC) study, commissioned by the Ministry of Economy. The research provides an overview of the Armenian agriculture sector, while providing a detailed analysis of export opportunities and requisite certification, and quality and safety standards. Potential markets include the European Union (EU), the Eurasian Economic Union (EEU), and Georgia. The study also provides recommendations to farmers on effective export preparation.
14) EUR 3.3 Million Organic Agriculture Support Program Launched December 15th, 2015, http://arka.am/en/news/business/second_program_to_support_organic_agriculture_in_armenia_officially_launched/
A 37 month, EUR 3.3 million organic agriculture support program was launched this month – with EUR 2.8 million in contributions from the European Union (EU) and anther EUR 0.5 million from the Austrian Development Agency. The transition to organic production will be encouraged through four components: regulatory reform, farmer grants, market access facilitation, and consumer awareness campaigning, according to Deputy Minister of Agriculture Armen Harutyunyan. The program should increase production, tap new international markets and increase domestic consumption of organic goods, said the Deputy. Organic farming development is an integral part of the Ministry’s sustainable development program, said Harutyunyan. The state’s agricultural programs aim to reduce the living-standard gap between the provinces and the capital, according to Peter Switalski, head of the EU Delegation to Armenia. This is the second organic agriculture support program; the first, 3-year, EUR 25 million project having been launched in January.
15) 6-Year Rural Finance and Infrastructure Development Program Launched December 4th, 2015, http://armenpress.am/eng/news/828327/six-year-program-for-rural-infrastructure-development-andfinancing-to-be-implemented-in-armenia.html
A 6-year rural finance and infrastructure development program has been launched by Armenia’s Rural Economic Development office. The project aims to increase incomes and provide stable employment through financial assistance, improvements in infrastructure, and farmer training and support programs. The financial assistance component will be funded by the International Fund for Agricultural Development (IFAD).
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BFC. Agriculture Finance Bulletin.
Private Sector 16) Agricultural Output up 11.6% to AMD 931.4 Billion December 28th, 2015, http://arka.am/en/news/economy/armenian_agriculture_grows_by_11_6_percent_in_11_months/ http://arka.am/en/news/business/exports_of_fruits_and_vegetables_from_armenia_grow_by_66_to_76_000_metric_tons/
Agricultural output in the first 11 months of 2015 grew 11.6%, totaling AMD 931.4 billion, according to Minister of Agriculture Sergo Karapetyan. Cultivated area increased by 18,500 hectares, totaling 78.2% of arable land, said the Minister. Wheat production was up 9.2% year-on-year, totaling 369,000 tons and meeting 53% of domestic demand – up from 48.2% in 2014. The government aims to meet 70%-72% of domestic demand by 2020, according to Karapetyan. As of December 28, 2015, fruit and vegetable exports were up 65.9% to 76,000 tons, including 4,000 tons of greenhouse cucumbers and 2,600 tons of greenhouse tomatoes, said the Minister. Of the total, 83.4% was destined for Russia, compared to 46.2% in 2014. Other export destinations included Georgia, Kazakhstan, Belarus, Poland, the UAE, Kuwait and the Czech Republic, said Karapetyan.
17) “Increase Potato Cultivation to Meet Sanction-Related Surge in Russian Demand” December 23rd, 2015, http://www.armenianow.com/economy/68963/armenia_agriculture_2016_economy_berberyan
Hrach Berberyan, Chairman of the Armenian Agrarian-Farmers Union, has urged farmers to cultivate more new potatoes in wake of a Russian embargo on Turkish products. The ban, put in place flowing Turkey’s downing of a Russian aircraft, will lead to a surge in demand on the Russian market, according to Berberyan. The market will be open to Armenian potato imports from late May until July 20, after which Russian new potatoes will arrive, assured Berberyan. About 10,000 tons of potato are needed to meet export requirements, he added. There is demand for tomatoes too; however, with much of the crop spoiled by moths, requisite export quantities cannot be met, according to Berberyan. Since the moths appear in August, they do not affect the potato crop. Farmers need government assistance to deal with the pest, he concluded.
18) Agriculture Output Grows 14.5% in First 11 Months of 2015 December 22nd, 2015, http://news.am/eng/news/303416.html
According to preliminary data, agricultural output increased 14.5% in the first 11 months of 2015, with crop output increasing 11.6%, said Deputy Minister of Agriculture Samvel Galstyan. Wheat, vegetable and potato output all saw year-on-year growth, he added.
19) Zhamanak: Turkish Products Flooding Domestic Market Following Sanctions December 19th, 2015, http://news.am/eng/news/302924.html
Russian sanctions imposed on Turkish products following the latter’s downing of a Russian airplane have had a knock-on effect on Armenia’s domestic market, according to Zhamanak, an Armenian newspaper. Some had hoped the gap in the Russian market could be filled by Armenian products. It appears, however, that Turkish products – including cucumbers, tomatoes and peppers – have flooded Armenia and are pushing domestic products out, according to the Newspaper. The sanctions have led to a fall in the prices of Turkish products, leaving Armenian greenhouses unable to compete, it added. Page 6
BFC. Agriculture Finance Bulletin.
20) “Fruit and Vegetable Exports to Russia Could Reach 150,000 tons� December 14th, 2015, http://www.panorama.am/en/news/2015/12/14/russia-arnmenia-exports-vazgen-safaryan/1497959
In 2015, Armenia exported 68,000-70,000 tons of fruit and vegetables, including 10,000 tons of grapes, to Russia, according to Vazgen Safaryan, Chairman of the Union of Domestic Manufacturers. Considering an estimated 150,000 tons of agricultural goods could be exported every year, the Russian market should become a top priority, urged the Chairman. The government must devise a strategy to take advantage of the recent Russian embargo on Turkish goods, imposed following Turkey’s downing of a Russian aircraft, said the Chairman, adding that greenhouse capacity must be expanded. While this year saw plentiful harvests, farmers were unable to sell their produce, with the grape harvest, in particular, unable to find sufficient buyers, said Safaryan. While the drop in brandy exports to Russia is mostly due to the depreciation of the Russian ruble against the US dollar and the Armenian dram, the government must develop new economic policies to ensure the agriculture sector and related industries work as a single unit, concluded Safaryan. Minister of Parliament (MP) Lyova Khachatryan agreed that, while agricultural output was good, the lack of a comprehensive economic policy meant that potential new markets could not be accessed.
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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. The articles do not necessarily reflect the opinions of BFC, its staff, its associates or its partners. Copyright of articles is retained by their authors.