#12 BFC Armenia Agriculture Finance Bulletin

05/2016

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12 A rm e n i a Agriculture Finance Bulletin Minister of Agriculture Looking to Expand Cooperation with Germany Water Ideathon Sets Out to Solve Armenia’s Water Resource Problems Armenian Agricultural Output up in 2015 and the First Third of 2016 Armenian Meat Production Levels Decline

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Agriculture Finance Bulletin Edition #12, May 2016

Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5) 6) 7)

Armenian Technology Group Foundation Met with Minister Karapetyan ..................................... 2 State Commission Recommended to Survey Greenhouse Facilities ............................................... 2 Armenian Government to Scrap Irrigation Project after Protests .................................................. 2 Prime Minister Hosts Meeting with Heads of Grape Procuring Companies ................................... 3 Minister Karapetyan Calls for New Varieties of Apricots to be Cultivated ..................................... 3 Polish Investment in Armenia Expected to Expand ......................................................................... 3 Minister of Agriculture Looking to Expand Cooperation with Germany ......................................... 3

Foreign Aid ................................................................................................................. 4 8)

Water Ideathon Sets Out to Solve Armenia’s Water Resource Problems....................................... 4

Private Sector.............................................................................................................. 4 9) 10) 11) 12) 13) 14) 15)

Armenian Agricultural Output up in 2015 and the First Third of 2016 ........................................... 4 Many Local Fish Farms Facing Closure ............................................................................................ 4 Banning Turkish Vegetables in Armenia Could Drive Prices Up ...................................................... 5 Experts Call for All Agricultural Products to Have Increased Controls ............................................ 5 Armenian Wine Production Volumes Increasing in 2016 ................................................................ 5 Armenian Meat Production Levels Decline ..................................................................................... 6 Armenia’s Agriculture Output Grows 3.3% in the First Quarter ..................................................... 6

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)

Armenian Technology Group Foundation Met with Minister Karapetyan

May 30th, 2016, http://minagro.am/2016/05/%D5%B0%D5%B0-

Agriculture Minister Sergo Karapetyan received representatives of the Armenian Technology Group Foundation to discuss the Fund's current plans and directions as well as prospects for expanding bilateral cooperation.

Since its inception, the Foundation has been working to implement wide-ranging and significantly important projects in helping Armenia’s agriculture sector develop. Of particular note is the Fund’s investment in Anwar sowing technology and the introduction of mobile laboratory for carrying out veterinary services. The Fund is also preparing three other mobile laboratories for deployment to help with veterinary services.

During the meeting, both sides exchanged views on a number of other issues of mutual interest as well.

2)

State Commission Recommended to Survey Greenhouse Facilities

May 26th, 2016, http://finport.am/full_news.php?id=24911&lang=3

Chairman of the Armenian State Commission for the Protection of Economic Competition, Artak Shaboyan, met with Russian Trade representative Andrey Babko and Trade Consultant Igor Zinovyev at the behest of Mr. Shaboyan to discuss Armenian exporters' problems. In particular, the meeting covered issues related to competition in export to the Eurasian Economic Union (EEU) as well as the ways to address them.

Shaboyan stressed the need to regulate the use of single principles of trade and services for all the EEU countries in order to create a legal framework of relations between suppliers and trade chains. The Russian representatives expressed their intention to help resolve the specified issues raised in the meeting. At the same time, Mr. Babko requested the State Commission for the Protection of Economic Competition survey the greenhouse facilities of Armenia as there is a high demand for Armenian vegetables in the Russian Federation.

3)

Armenian Government to Scrap Irrigation Project after Protests

May 23rd, 2016, http://www.azatutyun.am/content/article/27752505.html

Armenian Prime Minister Abrahamian has announced a halt to the construction of a controversial new irrigation canal amid protests by farmers strongly opposed to the project. The Armenian government planned to divert water from a river that serves as a main source of irrigation to farmers in Garni (Kotayk province) so that it could be delivered to twelve villages in the southern Ararat province.

Many Garni residents have opposed the plan from the beginning, siting the river’s capacity for meeting the needs for irrigation and drinking water as currently barely adequate. Villagers eventually protested by blocking a highway that passes through Garni, and after a tense conversation with protestors, the Prime Minister announced that the construction would be stopped and the construction equipment removed.

The canal was part of a USD 37 million project which is calling for switching from pump-based to gravity irrigation systems in four agricultural regions in Armenia.

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BFC Agriculture Finance Bulletin

4)

Prime Minister Hosts Meeting with Heads of Grape Procuring Companies

May 23rd, 2016, http://news.am/eng/news/328660.html

A meeting was held by Prime Minister Abrahamyan with heads of grape procuring companies and representatives from various government agencies. The meeting addressed the activities of the companies, their future plans and issues related to restoring export volumes as well as the organization of grape procurement this year and existing issues in the fields. At the end of the meeting, the Prime Minister instructed the Ministers of Economy and Agriculture to continue discussions with the companies on developing measures aimed at further development of the sector, finding new markets, and helping the companies overcome existing issues.

5)

Minister Karapetyan Calls for New Varieties of Apricots to be Cultivated

May 17th, 2016, http://www.panorama.am/en/news/2016/05/17/apricot-selection/1580908

Agriculture Minister Sergo Karapetyan has called for the cultivation of new, robust varieties of apricots through selection from the apricot collection orchard. To this end, the Minister announced a plan to create a plant nursery for implementing vaccination and the sale of the best varieties of apricot to farmers for further cultivation.

The apricot collection orchard was planted in 2012 and contains 82 genetic varieties of apricot, including many imported ones considered the best in Europe.

6)

Polish Investment in Armenia Expected to Expand

May 17th, 2016, https://armenpress.am/eng/news/847471/polish-entrepreneurs-interested-in-investing-in-armenia.html

In a recent meeting of the Polish-Armenian Economic Cooperation Intergovernmental Commission’s cochairs, both sides reiterated a desire to contribute to the expansion and development of cooperation in all directions. Co-chair and First Deputy Minister of Economy of Armenia, Garegin Melkonyan, noted that there are a number of Polish entrepreneurs willing to invest in Armenia via the creation of joint enterprises. Undersecretary of State of the Ministry of Economic Development of Poland, Radosław Domagalski-Łabędzki, also emphasized Polish interest in expanded cooperation, stating that the investment atmosphere is favorable in Armenia and that he fully expects to see more Polish investments in Armenia and a greater presence of Armenian businesses in Poland.

7)

Minister of Agriculture Looking to Expand Cooperation with Germany

May 2nd, 2016, http://finport.am/full_news.php?id=24557&lang=3

Armenian Agriculture Minister Sergo Karapetyan has expressed a desire to expand cooperation with Germany in various fields of agriculture including the wine production and fishing industries. The Minister met with German Ambassador to Armenia Matthias Kiesler to discuss possible areas of further bilateral cooperation such as the introduction of modern technologies in agricultural sectors, the establishment of joint enterprises for introducing drop irrigation, and anti-hail protection systems.

During the meeting, Minister Karapetyan noted how Germany’s experiences could serve as a good model for Armenia and emphasized the important works conducted by the German Society for International Cooperation (GIZ) and KfW German Development Bank. At the end of the meeting, both sides committed to making a combined effort for expanding cooperation in the agricultural sector.

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BFC Agriculture Finance Bulletin

Foreign Aid 8)

Water Ideathon Sets Out to Solve Armenia’s Water Resource Problems

May 27th, 2016, http://www.panorama.am/en/news/2016/05/27/%E2%80%9CWater-Ideathon%E2%80%9D/1586874

As part of its Science, Technology, Innovation and Partnership efforts, the United State Agency for International Development has announced a 24-hour Water Ideathon — competition of ideas through in which Armenian and American partners will mobilize local talents of all ages and diverse backgrounds to develop new ideas to solve Armenia’s water resource challenges.

Armenia is a small, landlocked country heavily reliant on agriculture, and water consumption in many areas of the country has lowered water quality to the point where many must now pump ground water where they once had access to flowing water.

Innovative and concerted efforts are needed to stave off the worst impacts of these problems and set Armenia on a path for sustainable water resource management. During the Ideathon, selected teams will gather at the TUMO Center on June 11-12 and have about 24 hours to flesh out their solution to a specific problem with water resource management in Armenia. At the end of the 24 hours, the teams will pitch their idea to a review panel which will select winners in three categories. Some teams will be looking for solutions driven by IT and data analysis; others will develop solutions using public policy, governmental reforms, media initiatives and public outreach; and a third group will look at engineering solutions using math, design, and empirical analysis. An additional award will go to the best idea from a group made up of young students, ages 14 to 19.

Private Sector 9)

Armenian Agricultural Output up in 2015 and the First Third of 2016

May 25th, 2016, http://armenpress.am/eng/news/848484/vegetable-fresh-fruit-exports-grow-every-year-says-agricultureminister.html http://news.am/eng/news/328943.html

Since the beginning of the current year, Armenia has virtually doubled the volume of fruit and vegetable exports. Exports have amounted to about 80 thousand tons since the beginning of the year, 19,500 tons more than the same period in 2015. The addition of many more greenhouses and exporters now knowing the process have accelerated the agricultural export output.

The final numbers for 2015’s gross agricultural output also showed growth of 11.7% over 2014 numbers.

This is largely due to the increased use of arable land from 47% in 2014 to 79% use last year.

10) Many Local Fish Farms Facing Closure May 24th, 2016, http://arka.am/en/news/business/twenty_fish_farms_shut_down_this_year/ http://finport.am/full_news.php?id=24868&lang=3

Arthur Atoyan, Chairman of the Union of Fish Producers and Exporters, announced that about two dozen fish farms have shut down in Armenia since the beginning of the year — with three of them shutting down in the past week. The main reason for this is the gradual consolidation of the market pushing small fish farms out. The cost of growing fish is rather high in Armenia while wholesale prices are currently low. Many owners of smaller fish farms have credit obligations that they are unable to Page 4

BFC Agriculture Finance Bulletin

meet of the moment, and a planned increase in water charges will very likely see a number of other fish farms close their doors.

The difficulty in some fish farms has led to frustration with the Ministry of Agriculture as many feel that they are not taking the problem seriously enough and need to take preventative measures to address the problems of local fish farms. Haykaz Zeynalyan, the head of a fish farm, noted that there is a lack of preferential lending and state subsidies, leading to an environment of monopolization.

The Ministry of Agriculture responded that no large-scale fish farms have closed and that the industry is growing as evidenced by a 6.4% increase is gross fish breeding output in 2015 and a more than 1 ,000 ton increase in annual fish exports since 2011.

11) Banning Turkish Vegetables in Armenia Could Drive Prices Up May 23rd, 2016, http://arka.am/en/news/economy/prohibition_of_turkish_vegetables_in_armenia_can_drive_prices_up_expert/

Turkish greenhouse vegetables, particularly tomatoes, have successfully been competing with locally produced varieties, causing farmers in Armenia to have to reduce their prices. The success of the Turkish vegetables has caused many domestic producers in Armenia to call for a ban on Turkish imports.

However, the head of the Union of Domestic Commodity Producers, Vazgen Safaryan, warned that any such action to ban Turkish imports would be premature as it would likely cause an artificial price hike on many products since domestic competition is not yet developed enough to prevent this.

12) Experts Call for All Agricultural Products to Have Increased Controls May 20th, 2016, http://arka.am/en/news/business/expert_says_authorities_should_step_up_control_over_domestically_produced_and_import ed_foods/

The head of a Food Safety Center laboratory, Levon Ajemyan, believes that Armenia needs to step up its quality control of domestic and imported agricultural products. Currently, many imported foods and food products are only subject to phytosanitary control, and there is not control over domestic pesticide use. This raises concerns over the possibility of harmful substances entering the market that could have long-lasting health effects on Armenian citizens.

13) Armenian Wine Production Volumes Increasing in 2016 May 14th, 2016, http://www.panorama.am/en/news/2016/05/14/wine-rmenia/1579794

The National Statistic Service of Armenia (NSS) has reported that 1,441.3 liters of wine has been produced in the first third of 2016 (a 5.2% increase over the same period 2015). Sparkling wine production has increased by 60.2%, and whiskey production has produced five times more than in 2015.

The NSS also reported a decrease in the production volumes of vodka and beer (a 21% decrease and a 7% decrease, respectively).

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14) Armenian Meat Production Levels Decline May 7th, 2016, http://www.panorama.am/en/news/2016/05/07/Levels-of-meat-production-decrease-in-Armenia/1575740

The National Statistic Service of Armenia (NSS) has announced that levels of meat production decreased by 0.6% in Armenia during the period of January 2016 through March 2016, dropping from 7,954.2 tons last year to 7,904.1 tons this year. The NSS data also shows the level of other meat products (e.g. sausage production) decreased by 1.9% while semi-finished meat goods increased in production by 22.2%.

15) Armenia’s Agriculture Output Grows 3.3% in the First Quarter May 3rd, 2016, http://arka.am/en/news/economy/armenia_s_agriculture_output_grows_3_3_to_amd_71_2_billion_in_jan_march_2016/

Armenia’s agriculture output amounted to more than AMD 71.2 billion in the first quarter of 2016, a 3.3% growth. This overall agricultural output growth includes a 2.9% growth in cattle breeding (amounting to AMD 66.8 billion), a 12.4% growth in the plant industry (amounting to AMD 4.4 billion), and a 75% growth in fisheries (amounting to AMD 10 billion). Milk output also showed a 2.9% growth and amounted to 168,900 tons while the egg output grew 9.7% to 115.6 million eggs produced.

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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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