#16 Armenia Agriculture Bulletin, BFC

09/2016

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16 A rm e n i a Agriculture Bulletin Agricultural Enterprises to Pay Income Taxes Starting in 2025 EU Ambassador Reiterates Commitment to Armenian Agriculture Autumn Exhibitions Showcase Armenian Goods to Buyers and Investors Armenia’s Agriculture Sector Output Down 3.8% Year-on-Year

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Contents State Initiatives ........................................................................................................... 2 1) 2)

Agricultural Enterprises to Pay Income Taxes Starting in 2025 ....................................................... 2 Armenia to Sign Cooperation Agreement with Russia’s Rostov Oblast .......................................... 2

Foreign Aid ................................................................................................................. 2 3) 4) 5)

EU Program Helps to Establish Cooperative Farms in Armenia ...................................................... 2 EU Ambassador Reiterates Commitment to Armenian Agriculture ................................................ 3 Greenhouses for Tavush Province ................................................................................................... 3

Private Sector .............................................................................................................. 3 6) 7) 8) 9) 10) 11) 12) 13)

Autumn Exhibitions Showcase Armenian Goods to Buyers and Investors ..................................... 3 Cheese Tops Armenian Dairy Production and Exports .................................................................... 3 Armenian Wine Production has Remained Consistent the Past Five Years .................................... 4 Wheat Producing Farmers Calling for Increased Wheat Prices ....................................................... 4 Wheat and Flour Imports into Armenia Decline ............................................................................. 4 Armenian Potato Harvest at 210,000 Tons So Far in 2016.............................................................. 5 Armenia’s Agriculture Sector Output Down 3.8% Year‐on‐Year ..................................................... 5 Armenian Tomato Exports See Drastic Growth in the First Quarter of 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.

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)

Agricultural Enterprises to Pay Income Taxes Starting in 2025

September 28th, 2016, http://news.am/eng/news/348882.html

Deputy Chairman of the State Revenue Committee (SRC), Vakhtang Mirumyan, announced during the second reading for a newly drafted tax code that agricultural enterprises included in the VAT zone will begin paying income taxes in Armenia starting in 2025. Mr. Mirumyan stressed that this will not affect individual farmers, only enterprises which are large enough to operate in the VAT regime.

2)

Armenia to Sign Cooperation Agreement with Russia’s Rostov Oblast

September 3rd, 2016, http://finport.am/full_news.php?id=26031&lang=3

Representatives of the Russian Rostov oblast and Armenia are planning to sign a cooperation agreement in the fourth quarter of 2016. The agreement envisages expanding bilateral cooperation in agriculture, energy and transportation as well as developing delegations of businessmen to conduct working trips between the two areas.

In 2015, trade turnover between Armenia and Rostov oblast amounted to USD 58.4 million, 25% higher than 2014; however, both sides believe that Armenia’s imports into the Russian oblast (valued at USD 2.3 million in 2015) can be improved.

Foreign Aid 3)

EU Program Helps to Establish Cooperative Farms in Armenia

September 27th, 2016, http://arka.am/en/news/society/over_50_cooperative_farms_established_in_armenia_as_part_of_eu_program/ http://finport.am/full_news.php?id=26295&lang=3

As many as 53 cooperative entities have been established in Armenia as part of the Eastern Partnership Program’s Agriculture Development Project. The European Union (EU)‐financed project, launched in 2015, will last until 2017 and has a total budget of EUR 25 million, with an additional EUR 1 million being provided by the Austrian Development Agency. One of the key aims of the project is to develop cooperative farms, seen as very effective for creating additional revenue in agriculture. To this end, the project arranged more than 51 business‐oriented seminars in all regions of Armenia to raise awareness about farmer cooperatives.

The project is expected to continue as a preliminary agreement has been made to launch a new project in 2017 with a budget of EUR 10 million. The focus in 2017 will be aimed at developing organic agriculture in the country.

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4)

EU Ambassador Reiterates Commitment to Armenian Agriculture

September 24th, 2016, http://armenpress.am/eng/news/861377/eu‐ambassador‐says‐armenia%E2%80%99s‐agriculture‐has‐ bright‐future.html

Speaking at the Annual Festival of Rural Life and Traditions, Ambassador Piotr Switalski of the European Union (EU) noted the enormous potential of agriculture to become Armenia’s economic driving force and reiterated the EU’s support for Armenian farmers saying that farmers in Armenia deserve EU support. In addition to the European Neighborhood Program for Agriculture and Rural Development’s EUR 20 million program, the ambassador announced programs for EUR 10 million for developing agriculture in the Armavir and Ararat provinces and EUR 3 million for helping develop organic agriculture.

5)

Greenhouses for Tavush Province

September 13th, 2016, http://news.am/eng/news/345957.html http://en.a1plus.am/1244793.html

The installation of plastic greenhouses has been launched in the Tavush province of Armenia as part of the United Nations Development Program’s (UNDP) Integrated Support to Rural Development: Building Resilient Communities project. Several dozen small greenhouses with a surface area of 60 to 130 cubic meters will be installed, and representatives from Russia are currently preparing a set of recommendations for heating boilers that will enable the greenhouses to be used year‐round, doubling or tripling profits in many cases. The heaters will work using pellets which can be locally created from any biomass, including agricultural waste.

The UNDP project is being financed with USD 5 million by the Russian government.

Private Sector 6)

Autumn Exhibitions Showcase Armenian Goods to Buyers and Investors

September 22nd, 2016, http://finport.am/full_news.php?id=26192&lang=3

Two exhibitions this autumn are seeking to increase demand for and recognition of locally produced goods, thereby also increasing local production, creating new jobs and establishing ties between Armenian and foreign businesses in sectors such as food processing, textiles, brandy and winemaking, pharmaceuticals, tourism and information technology.

This was the second year for the Made in Armenia 2016 exhibition, which was held between September 19 and September 22, 2016 at the Meridian Exhibition Center and was organized by the Development Foundation of Armenia. The PanArmenian Expo 2016 will be held at the Yerevan Expo Center between October 7 and October 9, 2016 and is being organized by Prom Expo LLC and the Chamber of Commerce of the Republic of Armenia.

7)

Cheese Tops Armenian Dairy Production and Exports

September 22nd, 2016, http://hetq.am/eng/news/71008/cheese‐tops‐dairy‐exports‐from‐armenia‐most‐goes‐to‐russia.html

During the first seven months of 2016, Armenia produced 13,000 tons of cheese, 3,600 tons of yogurt, 3,500 tons of sour cream, 550 tons of cottage cheese, 317 million liters of milk, and 7 million liters of ice Page 3

BFC. Agriculture Bulletin

cream. When compared to the same period in 2015, cheese production increased by 19.1%, milk by 2.7% and sour cream by 3.2%. Yogurt production decreased by 3.8%, cottage cheese by 5.3% and ice cream by 10.6%.

Cheese and cottage cheese top Armenia’s dairy exports with 3,300 tons of cheese and cottage cheese exported during the first half of 2016, with a customs value of USD 8.4 million. The primary market for Armenian cheese products is Russia, with smaller quantities this year being exported to the United States and Georgia.

8)

Armenian Wine Production has Remained Consistent the Past Five Years

September 21st, 2016, http://hetq.am/eng/news/70978/armenias‐wines‐production‐levels‐basicallyunchanged‐over‐past‐5‐ years.html

According to Armenia’s National Statistical Service (NSS), Armenia produced 3.314 million liters of wine in the first six months of 2016, a 10% increase over the same period last year. Of that, 780 thousand liters were exported, valued at USD 2.5 million. Since 2012, Armenian wine production has fluctuated around the 6 million liter mark (with a high of 6.68 million liters produced in 2013). During that same time, wine exports have ranged from 1.1 million liters to 2.1 million liters.

9)

Wheat Producing Farmers Calling for Increased Wheat Prices

September 13th, 2016, http://arka.am/en/news/business/wheat_procurers_make_huge_benefits_out_of_farmers_hard_work/

Hrachya Berberyan, chairman of a union of farmers, has voiced concern over payments made to wheat growing farmers by wheat procuring companies. Farmers are typically paid between AMD 90 and AMD 120 per kilogram of wheat; however, companies can turn that into wheat products worth up to AMD 460. Berberyan is calling for an increase to wheat prices for farmers to be at AMD 140. According to him, this will allow both farmers and wheat procuring companies to turn a profit.

Armenia produced 369,400 metric tons of wheat on 18,725 hectares in 2015, up from 2014’s 338,100 tons.

10) Wheat and Flour Imports into Armenia Decline September 9th, 2016, http://finport.am/full_news.php?id=26087&lang=3

In the first half of 2016, the import of wheat into Armenia fell to 2.1 thousand tons, a year‐on‐year decrease of 5.53%. Wheat imports from Russia (84% of this year’s total so far), however, have increased by 8.8%. The import of flour fell to 65.1 tons, a 55.1% year‐on‐year decrease, with Russian flour imports almost half of last year’s amount. At the same time, Armenia has increased its export of wheat by 85.3%.

A decline of 58% in grain imports was also reported over the first half of the year.

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11) Armenian Potato Harvest at 210,000 Tons So Far in 2016 September 5th, 2016, http://arka.am/en/news/economy/armenian_farmers_have_harvested_210_000_tons_of_potato/

As of September 5, Armenian farmers harvested 210,000 tons of potatoes on 34,077 hectares, 40,000 tons more year‐on‐year than in 2015. For many years, the supply of potato has been larger than demand, meaning the country is self‐sufficient in potatoes; however, adverse weather conditions from March through May caused a delay in early potato varieties and necessitated the importing of 3,392 tons into the country.

Lower potato prices have spurred farmers in the Lori and Shirak regions to suspend the sale of their potatoes in a hope to increase prices; however, this move has been criticized by the Ministry of Agriculture as their markets are likely to be filled by growers from other regions and an increase in potato imports.

12) Armenia’s Agriculture Sector Output Down 3.8% Year‐on‐Year September 2nd, 2016, http://www.panarmenian.net/eng/news/219854/

Armenia’s gross output of agriculture and fishing amounted to USD 191 million (AMD 90.6 billion) as of July 2016, down 3.8% over the same period of 2015; however, a 50% increase was observed in July as compared to June of this year. In addition, through the first seven months of 2016, all sectors’ revenue was USD 757 million (AMD 358.8 billion), a 1.3% increase over the same period of 2015.

13) Armenian Tomato Exports See Drastic Growth in the First Quarter of 2016 September 2nd, 2016, http://news.am/eng/news/344459.html

According to the State Revenue Committee of Armenia (SRC), the export of Armenian tomatoes grew from 724 tons in the first quarter of 2015 to more than 30 thousand tons in the first quarter of 2016, amounting to an increase of USD 18.72 million.

99% of the tomatoes were bought for Russian markets, the main purchaser of Armenian agricultural products for the last several years.

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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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