#15 Armenia Agriculture Bulletin, BFC

08/2016

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15 A rm e n i a Agriculture Bulletin Armenia to Introduce Agriculture Insurance System CARMAC II Project to Expand into 111 Communities Exports to Russia Experience 87.4% Year-on-Year Growth China Interested in Investing in Armenian Agriculture

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

Ministry of Agriculture: Rain is Coming, Harvest Now .................................................................... 2 Armenia to Introduce Agriculture Insurance System ...................................................................... 2 Armenian Vine-growing and Winemaking Fund Set to Begin Work ............................................... 2 Minister Karapetyan and US Ambassador Discuss Agricultural Cooperation ................................. 2 State Employment Agency Assists 5,226 Farmers ........................................................................... 3

Foreign Aid ................................................................................................................. 3 6) 7) 8) 9) 10)

CARMAC II Project to Expand into 111 Communities...................................................................... 3 16 Farm Enterprises Get Subsidies to Develop Organic Agriculture ............................................... 3 International Assistance to Armenia’s Agricultural Sector Up 160% .............................................. 4 All Farm Animals in Armenia to be Tagged and Numbered ............................................................ 4 Special Vineyard to Preserve Grape Varieties to be Created in Armenia ....................................... 4

Private Sector.............................................................................................................. 5 11) 12) 13) 14) 15) 16) 17)

Exports to Russia Experience 87.4% Year-on-Year Growth ............................................................. 5 Shirak Region Provides 25% of Armenian Grain Production ........................................................... 5 Export of Armenian Horticultural Crops to EEU Markets Increased 90% ....................................... 5 China Interested in Investing in Armenian Agriculture ................................................................... 5 2016 Proving to be a Fruitful Year for Armenian Fruits and Vegetables ......................................... 6 Yerevan Hosts Made in Armenia 2016 in September ..................................................................... 6 Easier, More Affordable Loan Product for Farmers ........................................................................ 6

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 » 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 Bulletin

State Initiatives 1)

Ministry of Agriculture: Rain is Coming, Harvest Now

August 29th, 2016, http://arka.am/en/news/society/armenian_agriculture_ministry

The Armenian Ministry of Agriculture is recommending that farmers harvest their crops as soon as possible as heavy rains are expected. According to the Armenian Weather Agency’s forecast, rains will begin on September 1 or September 2 over most of the country, causing the temperature to also fall 2 to 4 degrees.

2)

Armenia to Introduce Agriculture Insurance System

August 15th, 2016, http://arka.am/en/news/economy/armenia_to_introduce_agriculture_insurance_system/

Armenia is set to introduce a system of agricultural insurance with support from the Central Bank of Armenia. The system is being designed with the international experience of agricultural insurance in mind but will ultimately be designed to meet the specific needs in Armenia. Financial assessments and development of the necessary instruments are being carried out currently. The first pilots of the insurance program are expected to begin in 2017 with the fruit and plant growing segments of the agricultural sector and then expanded to include cattle-breeding later in 2017.

An agricultural insurance system has been long-discussed in Armenia but never put into practice before now.

3)

Armenian Vine-growing and Winemaking Fund Set to Begin Work

August 10th, 2016, http://arka.am/en/news/business/armenian_vine_growing_and_winemaking_fund_to_start_operating_soon/

The newly established Armenian Vine-growing and Winemaking Fund is set to begin work in the near future. The Fund will begin with activities centered around the development of the Armenian wine brand, developing and diversifying markets, and increasing participation in wine exhibitions. Special attention in these areas will be towards expanding into European markets so as to not be so heavily dependent on the Russian market which currently takes 79% of wine exports from Armenia.

The Fund was established at the behest of the Armenian government in order to give a boost to the wine industry which saw a 4% drop in total wine output and a 31.5% drop in wine exports in 2015.

4)

Minister Karapetyan and US Ambassador Discuss Agricultural Cooperation

August 9th, 2016, http://finport.am/full_news.php?id=25774&lang=3

Agriculture Minister Karapetyan met with US Ambassador to Armenia Richard Mills to discuss recent cooperative efforts between the two countries in the agricultural sector. During the meeting, the two sides took note of the positive effects of ongoing US-sponsored programs in Armenian agriculture over the past few years while identifying issues that need further development such as the need to plant quick-growing orchards, the need for greenhouse facilities, and the need for cost-saving fish farms as well as the need for drip irrigation systems and anti-hail systems. Ambassador Mills also reiterated the US Embassy’s commitment to support agriculture in Armenia as it sees agriculture as the biggest and best route for economic development in Armenia.

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5)

State Employment Agency Assists 5,226 Farmers

August 8th, 2016, https://armenpress.am/eng/news/856384/state-employment-agency-assists-5226-farmers.html

The State Employment Agency of Armenia signed contracts with 5,226 landowners/farmers as part of the Assistance to Rural Economy through Promoting Seasonal Employment project. 6,809 people have been engaged in employment activities under the project which gives a priority to restoration following damages from natural causes in mountainous and border communities.

As of August 8, more than 400 communities have been involved in the project since it was launched in 2013.

Foreign Aid 6)

CARMAC II Project to Expand into 111 Communities

August 16th, 2016, http://finport.am/full_news.php?id=25869&lang=3

The success of the Community Agricultural Resource Management and Competitiveness project (CARMAC), implemented by the World Bank in cooperation with the Ministry of Agriculture of Armenia, has prompted a launch of the CARMAC II project. 111 communities have already expressed a desire to join the project for its first year of implementation, up from the 81 which participated in the first CARMAC. The original CARMAC project was designed to improve the productivity and sustainability of pasturebased livestock farms and oversaw inefficient pastures become more suitable for use, leading to an increase in milk production of 35% and saw livestock productivity nearly double.

The scope of CARMAC II is still focused on further development of rural enterprises, including cooperatives and associations, as well as strengthening the links between agricultural producers and the food processing industry. Under CARMAC II, livestock productivity could be increased by another 40% with improved animal husbandry, feed and veterinary care; crop yield increases of 60% are also feasible in the medium term with better varieties of seed and improved soil management. A second component to the project will also see grant projects with agricultural cooperatives be co-funded up to 20%.

The World Bank is providing USD 32.67 million for CARMAC II, up from the USD 16 million for the first CARMAC project.

7)

16 Farm Enterprises Get Subsidies to Develop Organic Agriculture

August 12th, 2016, http://finport.am/full_news.php?id=25829&lang=3

16 farm enterprises have been chosen to receive EUR 2.8 million in subsidized funding from the European Union and Austrian Development Agency for the development of organic agriculture. The first stage of the program provides for farm enterprises engaged in winemaking, plant growing, honey production, and eco-tourism with an opportunity to make use of organic practices and obtain organic certification. The second stage of the program, to be launched in October 2016, will see the number of farm enterprises able to apply for and receive financial assistance through the subsidies increased to 40.

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8)

International Assistance to Armenia’s Agricultural Sector Up 160%

August 12th, 2016, https://armenpress.am/eng/news/856911/international-donors%E2%80%99-assistance-toarmenia%E2%80%99s-agricultural-sector-increased-by-160.html

Deputy Minister of Agriculture Armen Harutyunyan announced that assistance from international organizations to assist in the development of Armenia’s agricultural sector has increased by 160% in recent years. In particular, the European Union has provided EUR 25 million for the recently finished ENPARD project and is looking at a further investment of EUR 10 million as part of ENPARD 2, and the Organic Agriculture project is providing EUR 2.8 million in assistance. The total portfolio of the Austrian Development Agency is EUR 4 million, and the Swiss Development Agency is expected to provide assistance totaling over EUR 20 million by the end of 2019. USAID’s Clean Energy and Water project is infusing another USD 5.6 million, and the Russian Federation is providing USD 5 million for the Development and Village and Agriculture project in the Tavush province over the next three to five years.

Agricultural projects with financial assistance from international organizations are currently being implemented and planned in all regions of Armenia.

9)

All Farm Animals in Armenia to be Tagged and Numbered

August 12th, 2016, http://arka.am/en/news/business/all_farm_animals_in_armenia_to_be_tagged_and_have_numbers/

A three-year program to tag and register livestock in Armenia will kick off in 2017. The aim of the program is to control the movement of meat products and improve their quality and safety. The new system will enable officials to be able to quickly identify pockets of disease as well as to increase agricultural insurance guarantees to farmers. After introduction of the new system, the sale of meat from unregistered livestock will no longer be permitted.

The initiative to register and give numbers to farm animals is being run by the State Food Safety Service and was designed by Austrian and Swiss development agencies. This follows other assistance programs from various international organizations that have led to upgraded veterinary services, slaughterhouses and laboratories.

A pilot project to register and number livestock has already been successfully conducted in the Vayots Dzor province and saw 23 thousand cattle registered.

10) Special Vineyard to Preserve Grape Varieties to be Created in Armenia August 12th, 2016, http://arka.am/en/news/business/armenia_to_create_also_special_vineyard_to_conserve_grape_varieties_and_breed_new_o nes/

Following the success of a special apricot orchard created in 2013 which preserves existing apricot species and breeds new ones, Armenia will also create a similar vineyard to preserve grape varieties while also exploring new breeding opportunities for the fruit. Studies have shown that Armenian winegrowers used to cultivate more than 600 varieties of grapes while there are no more than 60 varieties cultivated today.

In 2015, Armenian wineries and food processing companies bought a total of 216,800 metric tons of grapes, up 17.8% over the same period in 2014.

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Private Sector 11) Exports to Russia Experience 87.4% Year-on-Year Growth August 25th, 2016, http://finport.am/full_news.php?id=25948&lang=3

According to the National Statistical Service of Armenia, exports from Armenia to the Eurasian Economic Union in the first half of 2016 grew by 83.7% and totaled USD 174.6 million. The growth of the aggregate amount of exports from Armenia to Russia also grew and showed an 87.4% increase over the same period in 2015, amounting to USD 168 million. At the same time imports from Russia into Armenia declined by 3.7% and totaled USD 431.6 million. Trade turnover between Armenia and Russia grew by 12.4% in the first half of 2016 compared to the first half of 2015 and totaled USD 599.6 million. The share of trade turnover with Russia in the overall foreign turnover of Armenia also increased from 24.1% to 26.4%.

12) Shirak Region Provides 25% of Armenian Grain Production August 18th, 2016, http://finport.am/full_news.php?id=25881&lang=3

In a recent visit to the Shirak region, Agriculture Minister Sergo Karapetyan took notice of the regions wheat production, stating that it provides 25% of the total grain production in the country. Last year, the region produced more than 92,000 tons of grains and is expected to increase that production this year to nearly 100,000 tons.

According to the National Statistical Service, the gross agricultural produce increased 3.2% to AMD 268 billion in the first half of 2016, versus AMD 250 billion for the same period of 2015.

13) Export of Armenian Horticultural Crops to EEU Markets Increased 90% August 12th, 2016, http://finport.am/full_news.php?id=25832&lang=3

The export of Armenian horticultural crops to Eurasian Economic Union (EEU) member states has increased by 90%, indicating that the intensive efforts of Armenian agricultural producers and EEU working groups has paid off as well as that the EEU is proving to be a convenient outlet for Armenian agricultural products. In order to further facilitate Armenian agriculture within EEU markets, conferences and negotiations are continuing to be held that hope to set up exchanges for agricultural products, increasing the efficiency and competitiveness of agricultural goods in EEU member states.

Armenia’s EEU membership has also enabled it to more easily sign free trade agreements with other countries like Vietnam, Israel, Iran, China, and India. According to the National Statistical Service of Armenia, the first half of 2016 saw Armenia's foreign trade turnover increase by 2.7% to USD 2.3 billion; in particular, exports grew by 16.7% to USD 815 million.

14) China Interested in Investing in Armenian Agriculture August 10th, 2016, http://arka.am/en/news/business/china_ready_to_invest_in_armenia_s_agriculture/

As part of an agreement on developing bilateral relations between Armenia and China, a Chinese delegation from the province of Heilongjiang made a three-day visit to Armenia to meet with representatives of Armenian ministries and departments and entrepreneurs as well as to visit various food-processing companies and educational institutions. During the visit, the delegation learned about Armenia’s agricultural sector and was impressed by Armenian food-processing companies. As a result of Page 5

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the visit, several Chinese businesspeople are considering the possibility of establishing a joint foodprocessing company to export products to the Heilongjiang province, one of China’s largest provinces and home to 38 million people.

According to Armenia’s National Statistical Service, Armenia's trade turnover with China in 2015 dropped by 18% to USD 481.3 million, with Armenian exports to China declining 3.3% to USD 165.3 million.

15) 2016 Proving to be a Fruitful Year for Armenian Fruits and Vegetables August 9th, 2016, http://arka.am/en/news/business/armenian_agricultural_processing https://armenpress.am/eng/news/856500/fresh-fruit-vegetable-exports-from-armenia-increase-drastically.html

Despite early spring frosts and hail, this year for Armenian fruits and vegetables is turning out to be a very good one for both domestic use of the products and export of them to foreign markets.

Domestically, Armenia’s agricultural processing companies are ready to procure 71,300 metric tons of fruits and vegetables this year, 35% higher than the total amount of actual purchases in 2015.

Specifically, companies are looking to purchase 48,000 tons of tomatoes, 6,472 tons of apples, 5,334 tons of peaches and 7,640 tons of apricots.

In addition, the export volume of fresh fruits and vegetables has already exceeded last year’s overall export numbers. More than 85,000 tons of fruits and vegetables have been exported so far in 2016 (76,700 tons of the products were exported in all of 2015). Export volumes of fruits and vegetables for all of 2016 are expected to reach 120,000 tons. 85% of the exports have been sent to Russian markets, with Georgia, Belarus, Iraq and the United Arab Emirates receiving the rest.

16) Yerevan Hosts Made in Armenia 2016 in September August 4th, 2016, http://finport.am/full_news.php?id=25721&lang=3

The Made in Armenia 2016 exhibition will take place in Yerevan between September 15 and September 17, 2016. The exhibition will give foreign companies and investors the opportunity to explore a wide variety of Armenian industry actors from food processing, textile manufacturing, and brandy and winemaking among other sectors. Governmental and private entities, distributors, buyers and investors are expected to take part in the event, and it hopes to create an atmosphere where clients and company representatives can meet and make deals. Participation is free of charge.

17) Easier, More Affordable Loan Product for Farmers August 4th, 2016, http://agrocredit.am/easy-and-affordable-loan-product-for-farmers/

Within the framework of the KfW-financed Support for the Agricultural Sector, Phase II program, CARD AgroCredit, UCO CJSC, and Berkarat Jermots LLC have signed partnership agreements for the purpose of developing agricultural value chain financing in Armenia. The program, being implemented with the guidance of lending experts from the Business \u0026 Finance Consulting (BFC) company, plans to eventually expand agricultural value chain financing to farm services centers and regions all over Armenia. The program will extend the range of credit services for farmers while at the same time making them more affordable.

Agricultural value chain financing represents a new paradigm for agricultural lending in Armenia and will give farmers new and exciting credit options with increased services such as faster, on-site decision making.

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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.

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