Agriculture and Food
always an essential sector of the Armenian economy, experienced a rise
of 50 to 55 percent in the share of GDP as a result of the sharp decline
in the industrial sector.
The sector consists of 314,000 individual
private farms, 1600 private cooperative farms, and approximately 150 large
state and private agricultural enterprises. The Ministry of Agriculture
and Food is responsible for implementing agricultural policy and administrates
the activity of state owned agricultural and food processing enterprises.
Land Reform and Privatization
privatization, 886 large state owned agricultural enterprises accounted
for the 66 percent of gross agricultural output, while individual part
time small farms produced the remaining 34 percent. As a result of the
disastrous earthquake in 1990 the agricultural output fell by 28 percent
of the 1988 level. In 1991, the Government implemented land privatization
and the former structure of Collective and Soviet farms was dismantled.
By the end of 1993. 69 percent of plow land. 79.o percent of perennial
plantations, and 44.1 percent of hayfields were privatized and widely dispersed
among new owners. The remaining 20 percent of land was reserved under state
control for further distribution Emerged individual farms were generally
small (average 1.26 ha) and land insufficient. Simultaneously 350,000 head
of cattle were sold to private owners. Approximately 30 percent of remaining
assets (real estate, transport. machinery. and equipment) were also privatized.
As a result, agricultural outputs gradually increased in the following
three years (see chart below). In 1994 outputs grew by 11.6 percent comparing
with 1390. though there was a contrast between dynamics in crop sector
(a rise of 54.1 percent) and livestock sector (a fall of 23.4 percent).
The major share of supply, storage,
processing, and marketing enterprises remained under state control and
deceleration of its privatization considerably hampered development for
the three years following land privatization. In 1994, the Government corporatized
and introduced for privatization the major part of state owned enterprises
in the agricultural sector. By the end of 1995, 77 enterprises had been
sold to private owners. Currently state owned enterprises are mainly carrying
out activities on agrotechnology, fertilizer and chemical supply, seed
growing, pedigree breeding, and water supply. By the end of 1997, the Government
intends to complete privatization gradually restricting their direct involvement
in the agricultural sector.
weather is favorable for cultivation of many high quality foods including
grapes, apricots, peaches, pears, figs, nuts, walnuts, geranium, sea-buckthorns,
olives, tobacco, gourds, and vegetables throughout the country. Cereal
crops and potatoes are extensively cultivated mainly in the foothills areas.
After land privatization the area for cereal crops and potato cultivation
increased significantly by lowering the fodder areas. Attachment 9 reflects
the dynamics of agricultural areas and crop product yields.
Comparing to 1990, the gross agricultural
product increased; however, by 1994 it had not reached the 1986 level due
to the transitions to a market economy, land erosion deteriorating irrigation
system, and a lack of sufficient fuel, fertilizers, and chemicals resulting
from the transport blockade.
1986 to 1988 stock breeding accounted for 50 to 55 percent gross agricultural
product. Cattle, sheep, pig breeding, poultry, and apiculture were extensively
developed. However, a large share of the country's needs in meat, butter,
and milk was met by imports. After the earthquake in 1988, there was a
dramatic reduction in the number of animals and production yields. This
was followed by reductions of import and domestic production of fodder,
energy and fuel cost increase, and unfavorable market conditions leading
to subsequent deterioration of the sector. A decease of 20 percent of gross
agricultural product resulted. Attachment 10 reflects the dynamics of livestock
number and production yields.
After a sharp decline of livestock,
a balance between livestock numbers and fodder availability developed to
equilibrium. In the Government privatized many of the pig breeding and
farms. The introduction of pedigree breeds and efficient tech will provide
improvement in cattle breeding.
has 286,000 ha of watered fertile land. Two separate state enterprises
are responsible for water supplies, repairs, and maintenance of the irrigation
system, and the construct irrigation projects. The irrigation system consists
of 83 reservoirs, totaling .977 million cubic meters; 365 pumping stations
with 440 MW capacity; 2100 deep wells; and 21,000 km of main and branch
canals. The irrigation system has had inadequate maintenance and repair
for the last several years. Currently it is obsolete, consumes a large
amount of energy (1 KW/h per 3.25 cubic meters), and has losses of approximately
50 percent of water. In 1994, the World Bank approved the Irrigation Rehabilitation
Credit ($43 million) to assist rehabilitation of the irrigation infrastructure.
It proposes the reconstruction of eight irrigation systems, four reservoirs,
four pumping stations with a pressurized pipeline, and 650 deep wells with
food processing sector of industry, closely related with domestic agricultural
production. consists of 160 state owned large and medium enterprises, producing
canned fruits and vegetables, milk and dairy products, meat and its quality
products, mixed feed, flour and bread. alcohol. soft drinks and mineral
water, and cigarettes.
The available varieties of quality
domestic fruits, gourds, and vegetables gives Armenia the opportunity of
having a profitable canned food production. This sub-sector consists of
14 plants having capacity of 457 million conventional units (0.65 kg) annually.
During 1994 only ten percent of the designed capacities was used resulting
in production of 35,000 tons of fruits and 11,400 tons of vegetables, Far
below possibilities. Currently the FSU countries are the traditional markets;
however, the potential for exports remains under utilized.
In the mid 1 980s, the domestic demand
for milk and pure dairy products was larger than the supply. Modern dairy
farms were established after the earthquake under the program of economic
rehabilitation; however. the sharp decline in volumes of imported fodder
caused a decrease in production allowing for the demand to be met by imports.
Currently 35 milk, cheese, and dairy factories are operating with a annual
total capacity of 320,000 tons of milk and dairy products 20,000 tons of
cheese; and 13.000 tons of ice cream. The level of capacity utilization
in this sub-sector, higher than others, was approximately 40 percent as
a whole in 1994.
its Quality Products
In 1986 to 1988, the average consumption
of meat and its quality products was 130,000 tons annually Five large state
owned meat processing enterprises provided approximately 80 percent utilizing
domestic and imported raw materials. The blockade caused a substantial
increase in transport costs resulting in an abrupt reduction in forage
and meat raw materials imports. Faced with large operating losses, meat
enterprises reduced production levels dramatically. In 1994, the sub-sector
was virtually out of operation with only 0.5 percent still in use.
Bakery, and Flour Milling
Sharp declines in the production
levels of major food products occurred with the exception of bread production.
The country's annual demand for grain-crops is estimated as 1.0 million
tons of which 300,000 tons are met by domestic production. Recently small
private bakeries have successfully emerged and along with state owned enterprises
are in operation. Throughout the country there are 39 mills, four of large
capacity. Milling waste and barley are utilized in the production of mixed
feed. Total annual capacity of mixed feed production is 897,000 tons; however,
after cessation of forage imports only 20 percent of it is being used.
The availability of high quality
grapes, ancient traditions of viticulture, well developed infrastructure,
and production capacities currently provide for the sub-sector an essential
role in national economy. Armenian brandies are traditionally famous in
international markets. Varieties of dry, sweet, and sparkling wines are
consumed mainly in the markets of FSU. Presently the sub-sector consists
of 35 wineries, 3 brandy distillers, and 1 sparkling wine plant, as well
as approximately 170 grape purchasing and primary processing branches.
The average level of production capacity utilization in 1994 was at 25
percent, varying for different enterprises. The interruption of main transport
routes, loss of traditional markets, and a complicated financial situation
caused a decline in production volumes during recent years. Financial improvements
and expansion of markets has resulted in a tendency toward recovery since
Mineral Water, and Soft Drinks
Tobacco was extensively cultivated
in the northeast region of Armenia. Cigarettes were produced using both
domestic and imported tobacco. After a price and import regime liberalization
caused increased international competition in domestic markets, volumes
fell to 16 percent of the 1988 level. Throughout the country there are
1300 natural springs with high quality mineral water; however, there was
a sharp decrease also in the production of mineral water and soft drinks
due to difficulties in exporting and a decrease in domestic demand. The
beginning of 1995 saw a tendency for recovery for this division.
agriculture and food processing are extensive and dynamic sectors of the
national economy. Different sub-sectors of the food industry have been
faced with common difficulties concerning sharp competition both in international
and domestic markets, low level of management and marketing, gradual outdating
of equipment, lack of relevant packaging, and transport constraints. As
a first step of relief, the Government in 1994 introduced for privatization
127 enterprises; most privatized during 1995. In 1996, the Government plans
to proceed with privatization of mills and bakeries.
The formation of modern agriculture
is also hampered by difficulties, both inherited from the former economical
system and newly emerged. Particularly, the development of agricultural
markets is strongly confined by unfavorable financial and pricing situations,
with high level of loan interests, abrupt seasonal changes in demand and
prices, and lack of adequate infrastructure (proper insurance, mutual loans,
etc.). The Government, with the assistance of multilateral donors, intends
to implement several projects to improve present situation. Significant
urgent projects are as follows:
Agricultural Reform Support Program
will be implemented by the World Bank through the FAO. The estimated amount
is $26 million.
Agricultural Wholesale Market Project
of $24.6 million was approved by the EBRD. This project includes fresh
food market restructuring and improving.