09 BFC Armenia Agriculture Finance Bulletin

02/2016

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9 A rm e n i a Agriculture Finance Bulletin Agriculture Ministry Warns Against Starting Farm Work Now USAID Launches New Project for Sustainable Armenian Groundwater Levels EU to Invest EUR 30 million in Armenian Agriculture this Year Armenian Agriculture Sees 101.5% Growth Rate in January 2016

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Agriculture Finance Bulletin Edition #9, February 2016

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

Armenia Inks Agreement with India for Agricultural Cooperation ................................................. 2 Tax on Grape Vodka Production to be Reduced ............................................................................. 2 Agriculture Ministry Warns Against Starting Farm Work Now ....................................................... 2 Armenian Government to Compensates Irrigation Companies Losses........................................... 3 Armenia to Develop Dairy Cattle Breeding Strategy ....................................................................... 3

Foreign Aid ................................................................................................................. 3 6) 7)

USAID Launches New Project for Sustainable Armenian Groundwater Levels ............................... 3 EU to Invest EUR 30 million in Armenian Agriculture this Year....................................................... 4

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

First Export of Armenian Wine and Brandy to Belgium .................................................................. 4 Armenian Fruit and Vegetable Exports Increase Twofold ............................................................... 4 Armenian Agriculture Sees 101.5% Growth Rate in January 2016 ................................................. 4 Cheese Producers Call for Help ....................................................................................................... 5 Cheap Tomato Imports Undercutting Local Producers ................................................................... 5

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)

Armenia Inks Agreement with India for Agricultural Cooperation

February 22nd, 2016, http://news.am/eng/news/312974.html http://www.moneycontrol.com/news/economy/india-armenia-ink-pact-for-agri-cooperation_5572861.html

A memorandum of understanding was signed by Indian Agriculture Minister Radha Mohan Singh and Armenian Agriculture Minister Sergo Karapetyan in February which will provide for the setting up of a joint working group.

The group will be tasked with working in priority areas for both countries that include cooperatives, cattle identification, agriculture machinery, plant breeding, and exchange of agri-scientists and students.

The ministers also emphasized furthering relationships not only for catalyzing trade and investment prospects but also sharing the knowledge that the two countries have accumulated over the years.

2)

Tax on Grape Vodka Production to be Reduced

February 19th, 2016, http://finport.am/full_news.php?id=23842&lang=3 http://news.am/eng/news/312630.html

The tax on grape vodka production will be reduced in Armenia. The relevant draft amendments were approved at the February 19 meeting of the Armenian Parliament.

Introducing the amendments, Deputy Minister of Agriculture Robert Makaryan said the current tax impedes the activity of small producers, and there is nearly no grape vodka production in the country. In addition, he said, grape vodka is necessary for production of some wine. Local producers have taken to using wheat vodka instead, which is banned by the EU and Russian legislation — dampening export potential. The new rate will decrease the tax from AMD 15 million to AMD 50,000 per year and help processing enterprises resume procurement. The bill is also expected to boost grape procurement and increase the number of alcohol producers by 20.

3)

Agriculture Ministry Warns Against Starting Farm Work Now

February 18th, 2016, http://arka.am/en/news/business/agriculture_ministry_warns_farmers_against_starting_farm_work_now_/

Armenian Deputy Agriculture Minister Garnik Petrosyan warned farmers against starting farm work now because of unprecedented high temperatures: “Sudden changes in temperature are not desirable for agriculture.” According to Petrosyan, now is the time to trim fruit trees, but not to begin any other cultivation activities.

Record warm weather has been recorded across many regions of Armenia, but is expected to give way to cold spells over the next few months, with temperatures dropping to between 4 and 10 degrees Celsius.

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BFC. Agriculture Finance Bulletin.

4)

Armenian Government to Compensates Irrigation Companies Losses

February 11th, 2016, http://news.am/eng/news/311147.html

The Armenian government has decided to compensate irrigation companies for their losses. The losses will be partly covered by AMD 985 million that will be transferred from the restoration of irrigation systems program.

The total debt of irrigation companies reached AMD 1 billion 594 million (USD 3.3 million) on January 1, 2016.

5)

Armenia to Develop Dairy Cattle Breeding Strategy

February 9th, 2016, http://finport.am/full_news.php?id=23766&lang=3

Minister of Agriculture Sergo Karapetyan received a delegation of the Swedish DeLaval Company on February 9. The director of the Center for Agribusiness and Rural Development (CARD), Gagik Sargsyan, was also present at the meeting to discuss a five-year project of daily cattle breeding strategy in Armenia.

The strategy looks to increase the milk quality and milk producing capacity in Armenia by developing infrastructure and removing impediments to sector development. The strategy will be developed in cooperation with CARD in April-May 2016. The Armenian Minister stressed the need to study the peculiarities of the cattle-breeding sector in Armenia to take them into account when developing the strategy.

DeLaval is one the world's largest companies offering technological solutions in the field of milk production and has a rich experience in developing such strategies.

Foreign Aid 6)

USAID Launches New Project for Sustainable Armenian Groundwater Levels

February 10th, 2016, http://en.aravot.am/2016/02/10/174221/

During a public event on February 10, USAID announced the launch of the Advanced Science and Partnerships for Integrated Resource Development Project– a three-year initiative designed to curb the rate of groundwater abstraction in the Ararat Valley to sustainable levels.

USAID’s recent assessment of the status of groundwater resources in the Ararat Valley – the country’s key agricultural hub – has indicated an alarming situation. The decreasing level of the groundwater supply and the uncontrolled use of artesian water by fish farms has left some 30 communities without reliable access to drinking or irrigation water. In addition, these water shortages pose a real threat to the country’s agricultural sector, the socio-economic and environmental well-being of these regions, as well as the safety and security of Armenia’s sole nuclear power plant, which relies on these water resources for its cooling system.

USAID’s new ASPIRED project will assist the Government of Armenia in developing consistent policy and technical solutions for a more regulated use of these vital groundwater resources. The project will focus on closing data gaps, improving technical capacities and tools for informed decision-making, increasing access to innovative water conservation and energy efficiency technologies, and promoting regulatory and enforcement mechanisms.

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BFC. Agriculture Finance Bulletin.

7)

EU to Invest EUR 30 million in Armenian Agriculture this Year

February 9th, 2016, http://arka.am/en/news/economy/eu_to_invest_30_million_euros_into_armenian_agriculture_this_year/

The European Union will provide Armenia with EUR 30 million in assistance this year for its agricultural sector. The money will help Armenian farmers not only to acquire modern machinery, but also useful experience.

2015 saw an increase of 11.7% in Armenia’s agricultural sector, and the development of small- and medium-sized businesses, especially those outside of Yerevan, is considered to be a focus of the funds for this year. The EU also intends to conduct education and training courses around the country.

The EU is one of the largest trading partners for Armenia, investing EUR 50 million annually and is currently in negotiations with Armenia for a new, overarching framework for deepening their bilateral relations.

Private Sector 8)

First Export of Armenian Wine and Brandy to Belgium

February 26th, 2016, http://news.am/eng/news/313873.html

January saw the 10,000 bottles of wine and 1,700 bottles of brandy be exported from Armenia to Belgium — the first batch of Armenian-made wine and brandy to do so. This export batch included 23 different types of wine and 12 different types of Brandy. The move is being seen as one that will hopefully develop exports to other Benelux countries (The Netherlands and Luxembourg) as well.

9)

Armenian Fruit and Vegetable Exports Increase Twofold

February 23rd, 2016, http://news.am/eng/news/313181.html

A total of 10,248 tons of fresh fruits and vegetables have been exported from Armenia so far this year — more than double last year’s 5,093 tons over the same period. The exports include 3,299 tons of fruits and grapes and 6,949 tons of vegetables and potatoes as compared to last year’s 2,219 tons and 2,874 tons, respectively.

10) Armenian Agriculture Sees 101.5% Growth Rate in January 2016 February 22nd, 2016, http://armenpress.am/eng/news/836867/in-armenia-industry-services-construction-and-agriculturecontributed-to-the-55-growth-in-economic.html

The Armenian National Statistical Service presented preliminary principle macro-economic indicators characterizing the socio-economic situation of the Republic of Armenia for January 2016. According to the data, the socio-economic situation index amounted 105.5% with the growth rate of agriculture at 101.5%.

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BFC. Agriculture Finance Bulletin.

11) Cheese Producers Call for Help February 9th, 2016, http://www.lragir.am/index/eng/0/economy/view/35245

Complications with foreign trade have had an adverse effect on cheese making in Armenia and sales are down both at home and abroad. Exports are down due to the devaluation of the Russian currency. The director of the Ashotsk Cheese Factory commented on the situation, “I do not export much; I sell locally.

Here I sell for USD 3.5 – USD 4; if I take it [to Russia], I will have to sell for USD 3, transportation included.”

The head of the Association of Cheese Makers, Armen Grigoryan, noted that the cheese business is not isolated from other spheres: “Like everyone, we are also having losses. It is another issue how we became dependent on the Russian market, put all our eggs in one basket. If the Russian Ruble had not devaluated, the sanctions imposed on Russia would have favored us, but the Ruble dropped so much that export is not lucrative.” The problem is that the food prices are seriously down and the cost of production in Armenia is high. “Armenian producers need long-term and cheap loans,” he continued.

The heads of many cheese producing companies are also calling that they are having financial issues and need cheap and long-term loans.

12) Cheap Tomato Imports Undercutting Local Producers February 8th, 2016, http://hetq.am/eng/news/65571/cheap-turkish-tomatoes-hit-markets-in-armenia-local-producers-cantcompete.html/

Armenia imported 37.4 tons of tomatoes from Turkey, Iran, Georgia, Holland and Greece in 2015. The tomatoes, imported by a handful of individual proprietors, are sold at fairly cheap prices in local stores, undercutting local producers. Given that the bulk of tomato imports hit the Armenian market during the winter holiday season, they strongly compete with local produce grown in hothouses burdened with high natural gas prices.

“Natural gas is expensive, and people don’t want to spend extra money and then not be able to sell their produce. The market is flooded with Turkish tomatoes right now,” said Poghos Gevorgyan, head of an Armenian hothouse owner’s association.

Deputy Minister of Agriculture Garnik Petrosyan believes that produce imports are low in number and that they mostly hit the local market during the holiday season and winter months. “When our local produce hits the market in quantity, the issue of imports basically resolves itself,” said the Deputy Minister.

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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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