AHPC strategy

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The AHPC Strategy for Crop Production The AHPC Strategy for Crop Production The AHPC Strategy for Crop Production The AHPC Strategy for Crop Production

2012

2012

Երևանի ջերմատնային գոտու ծրագրի ներդրումների կատարման աջակցման մեխանիզմները

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The AHPC Strategy for Crop ProductionThe AHPC Strategy for Crop ProductionThe AHPC Strategy for Crop ProductionThe AHPC Strategy for Crop Production

The AHPC Strategy The AHPC Strategy The AHPC Strategy The AHPC Strategy

for Crop Production for Crop Production for Crop Production for Crop Production


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DraftDraftDraftDraft

The AHPC Strategy for Crop Production The AHPC Strategy for Crop Production The AHPC Strategy for Crop Production The AHPC Strategy for Crop Production

Table of ContentsTable of ContentsTable of ContentsTable of Contents

Executive Summary…………………………………………………………………………………….….4

Introduction………………………………………………………………………………………………..7

1. The Anticipated Role and Actions of the AHPC in the Business Processes for the Development of

Vegetable Production and Export ………………………………………………………………………..9

2. The Vision of the AHPC on the Development of Vegetable Production in Armenia………………12

3. The AHPC’s Strategy for the Creation of Vegetable Production and Export Cluster ……………...16

4. Main Socio-economic Outcomes Anticipated from the Program Implementation…………………26

5. The main activities of the AHPC during the upcoming years.………………………………………28


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The main goal for creating the present strategy is to support in the formation of the cluster of The main goal for creating the present strategy is to support in the formation of the cluster of The main goal for creating the present strategy is to support in the formation of the cluster of The main goal for creating the present strategy is to support in the formation of the cluster of

vegetable production in Armenia and export, as well as to organize the participation of the Armenian vegetable production in Armenia and export, as well as to organize the participation of the Armenian vegetable production in Armenia and export, as well as to organize the participation of the Armenian vegetable production in Armenia and export, as well as to organize the participation of the Armenian

Harvest Promotion Centre CJSC in the business processes ofHarvest Promotion Centre CJSC in the business processes ofHarvest Promotion Centre CJSC in the business processes ofHarvest Promotion Centre CJSC in the business processes of the cluster.the cluster.the cluster.the cluster.

In fact, the demand for food products constantly rises in foreign markets. Meanwile, the

popularity and demand for the Armenian harvest increases year after year. This provides a

framework for the development of the program aimed at the formation of the cluster.

The formation of the cluster assumes carrying out the following within the upcoming 7The formation of the cluster assumes carrying out the following within the upcoming 7The formation of the cluster assumes carrying out the following within the upcoming 7The formation of the cluster assumes carrying out the following within the upcoming 7----10 years: 10 years: 10 years: 10 years:

• To develop a new cluster for 500 ha heated and 1500-2000 ha unheated state-of-the-art

vegetable producing and exporting greenhouses equipped with supporting operation and

maintenance (cool storage, sorting, packaging) facilities, thus doubling the present volumes of

vegetable production, ensuring year-round production and at least 600 000 – 700 000 tonnes

of food reserves in compliance with export requirements:

• To create “an umbrella brand” for the Armenian harvest;

• To promote the realization of crop products in domestic and foreign markets, as well as to

promote the development of the respective logistic networks' capacities;

• To assist in forming an impartial and fast-acting independent vegetable quality assessment and

monitoring non-governmental body;

• To develop and apply mechanisms for attracting financial resources from international

financial markets in order to build and develop the capacities of crop production and export

cluster;

• To develop cooperation mechanisms in order to collaborate with scientific institutions, the

business community and government agencies, as well as to form a Cooperation Council;

Executive SummaryExecutive SummaryExecutive SummaryExecutive Summary


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Current SituationCurrent SituationCurrent SituationCurrent Situation

1. Land and water resources are underutilized in the Republic of Armenia: approximately the

33% (150 000 ha) of arable lands is misused for different reasons, and only 2.1 billion m³ out

of approximately 7.3 billion m³ fresh water reserves are used annually;

2. There are 8 climate zones in Armenia, and in case of well-organized production, it will be

possible to mitigate the seasonality factor considerably and organize production of multi-sort

and high-value crops.

Meanwhile, the total annual duration of sunshine (approx. 2000-3000 hours), the number of

sunny days (average annual: 316) and high intensity of solar radiation (average annual: 5100-

8100 MJ/m3) are ensure favorable conditions for the development of greenhouse production.

3. By underutilizing the aforementioned resources and underestimating export opportunities:

• Large-scale vegetable and roots production is not organized in Armenia for the purpose of

export, only up to 1% of the gross product is exported;

• Production is highly seasonal and there is lock of batches of product reserves in order to organize

year-round production for export. On top of that, the existing logistic (cool storage, sorting

packaging, transport and realization) facilities;

• Due to small-scale of production, the product reserves are insufficient and do not comply with

the quality standards of foreign market, first in terms of product sorting;

• Production is organized by using outdated technologies and poor technical equipment which

leads to low crop yield; costs are not optimized, and prices are often non-competitive in foreign

markets.

Social and economic impacts and benefits Social and economic impacts and benefits Social and economic impacts and benefits Social and economic impacts and benefits

1. The scale of the program will have considerable impact. Approximately 35-40 thousand

workplaces may be created in different regions. This will decelerate urbanization process;

promote the improvement of the villagers’ living standards and will contribute to poverty

reduction;


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2. The seasonal vegetable price fluctuations will be mitigated and their import volumes will

consideratly decrease;

3. A new economic cluster and capacities will be created in order to enter export markets. The

agricultural produce and export volumes will increase by 600-700mln USD or the production

volumes will increase by 35-41 % compared with those of 2010, and the countries’ total export

will increase by 59-69 %;

4. The creation of the Armenian “umbrella brand” for vegetables will be one of the key

anticipated outcomes. In case if the produce complies with quality standards, not only large

farms, but also small and medium ones will take advantage of it;

5. Besides solving the problems of the realisation of the greenhouse products, the creation of cool

storage, sorting, packaging, transportation and realisation logistic chain will also render

similar services to other seasonal producers and will gradually have a snowfall effect on the

future development of crop production, as well as in the strenghening of small and medium

farms and rural development;

6.6.6.6. Such increase in export volumes will lead to building new transport and realisation capacities

and schemes linking the farms to export markets, which will act es a platform and give an

impetus to the enhancement of the markets for other branches. The establishment of a series

of competitive large transportation companies with approximateliy 2000 trucks will lead to

decrease in the transportation self-cost.


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The global food and agricultural raw material prices have overcome the peaks in 2008,

nevertheless, they still remain high and, as it seems, will remain so for long. Though during the

previous decade food production has increased in different regions of the world (except for Western

Europe, Japan and Oceania), the crisis of food price is seriously reminding about the vulnerability of

the global food security, about the importance of raising and stabilizing production potential

especially in the developing countries. Agricultural sector faces increase in production costs on the

one hand, and sharp increase in the consumer demands of the developing countries and further

increase in the prices, on the other hand. The trends are becoming more acute in the result of the

influence of several other key factors.

First it is connected with the enhancement of global production of biofuel.

Second, the extream weather conditions followed by the continuing climate changes

occurring on the Earth are becoming more often and contain shocking contigencies for the food

market.

Third, the situation is also influenced by the regular growth in the world population and sharp

economic increase in the highly populated countries.

All these factors are important messages not only for international organizations and the

goverments of all the countries, but also for business circles.

According to the Armenian Harvest Promotion Centre, the aforementioned trends and the

current preconditions in Armenia are favorable for local and foreign businessmen in terms of making

large-scale investments in agricultural sector, technichal and technological modernization of the

sector, multiplying production and export volumes) as well as undertaking a significant role in large

foreign markets. In order to accomplish the goal, we should attract the attention of business circles

and state agencies from small-scale domestic market to large-scale foreign markets.

Introduction Introduction Introduction Introduction


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The experience of numerous small and sparsely populated countries demonstrates that the

territory of the country and the domestic market dimensions are not primary preconditions for large-

scale agricultural production and performing agricultural services, as well as for competitiveness in

international markets.

According to the Armenian Harvest Promotion Centre, Armenia has sufficient preconditions

for the expansion of agricultural production and export volumes by more effectively utilizing land

and water resources, climate conditions and by techinological equipment of the industry and

institutional reforms. It’s obvious that for any social organisation and business company it’s not

realistic to undertake the solution of the problems of such an expansive industry at once.

Consequently, the activity of the Centre is a business initiation which is especially targeted in crop

production and export. Through cooperation with state agencies and private investors, the Centre

will promote the attraction of large-scale state and private investment, prepare large-scale and

innovative programmes regarding the sector, organize their accomplishment, attract private

investments and enhance the reputation and popularity of the Armenian harvest in foreign markets,

as well as increase its competitiveness.

There are institutional, legal, inter-government commercial and contractual, infrastructure

building, technological equipment, marketing, quality standards introduction, finacial resources

attraction and various other complicated issues to be solved.


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The scale of the program on the creation of cluster, the need for new institutional solutions

and mechanisms of finacing, various functional roles of the participants, multi-level interrelations

between them and, in the meantime, the need for harmonized and justified actions of the entire

cluster assumes availability and constantly targeted activities of a detailed and well-developed

program and institution having sufficient professional skills. The Armenian Harvest Promotion

Centre has undertaken the roles of the author of the idea, the program driver and the organizer of the

program implementation.

The Centre is a public-private partnership the activity of which is based on commercial

principles. The Small and Medium Enterprises Development National Centre owns the majority of

the shares of the company.

We anticipate envolving strategic investors included in the cluster, such as greenhouse

producers, representatives from greenhouses, selection - seed farming and scientific institutions,

freight transportation companies, wholesalers, financial institutions, etc.

The relations among all the perticipants of the cluster are built on the basis of commercial

principles whilst retaining full sovereignty of each of them and meanwhile, based on the equality of

rights jointly solving common problems:

The commercial interests of the centre will be ensured by means of the paid services to be

rendered to the participants of the cluster (financial, engineering, trust, band name utilization), as

well as from return on possible investments.

In order to create appropriate reputation and reliability among the participants of the cluster

and foreign partner, as well as to ensure appropriate mechanisms for making balanced decisions, a

strategic approach has been adopted in accordance of which any shareholder of the Centre or persons

associated with him are not entiteled own more than 20 % of the shares of the Centre.

1.1.1.1. The Anticipated Actions and Role of the AHPC in the Business Processes of Crop The Anticipated Actions and Role of the AHPC in the Business Processes of Crop The Anticipated Actions and Role of the AHPC in the Business Processes of Crop The Anticipated Actions and Role of the AHPC in the Business Processes of Crop Production and ExportProduction and ExportProduction and ExportProduction and Export


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For the same purpose, a Cooperation Council has been formed from the representatives of the

aforementioned and other partner institutions, which aimes at discussing issues of strategic

importance, discussion of new development ideas and initiations, as well as the development of

communication between the participants of the cluster and designation of joint actions. We assume it

will become a platform for practical consolidation and guiding for the cluster.

The main objectives of the Armenian Harvest Promotion centre will be as follows:

1. Preparation and accomplishment of a master plan for the creation and development of crop

production and export cluster;

2. Foreign sales market research;

3. Preparation of general policy for the introduction and realization of the Armenian harvest in

new foreign markets, as well as the development of a plan for its implementation;

4. Development of cooperation policy for cooperation between the cluster and the government

or other institutions, organization of cooperation, including preparation of government decree

portfolios for postponing the payment deadlines for the customs duties to be imposed when

importing any goods or materials required for the investment program;

5. Organisation of investment attracting and development of mechanisms for attracting financial

resources from foreign financial markets for the creation and development of the cluster’s

volue chain;

6. Organization of technical and professional assistance by international donor organizations for

the preparation of the programmes on the creation and development of the cluster’s value

chain;

7. Preparation of the master plan for the development of crop cultivation in open field and on

the protected ground;

8. Development of the general policy of the cooperation between the cluster participants and the

major foreign producers of greenhouse structures and technologies, conducting negotiations

for more favorable conditions and providing technical consultation to the participants of the

cluster in the process of procurement;


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9. For the greenhouse zones:

• Organization of allocation of the required lands, organization of accessible procurements,

development of solutions for optimum utilization of the land area, ordering the master

plan of the zone;

• Organization of building the common thermal and electric energy, gas and water supply,

as well as water discharge main lines and production sources;

10. Development of mechanisms for long-term contractual cooperation between wholesalers and

small and medium farms, as well as carrying out monitoring for their execution;

11. Development of crop transportation capacities and routes, preparation of programmes aiming

at raising the reliability, as well as organization of their accomplishment, submitting proposals

on the assistance of the government in such matters;

12. Organization of involvement of the capacities and developments of the country’s scientific

and research, experimental, selection – seed farming and plant protection means producing

institutions for the solution of the cluster’s problems.

13. Preparation of organizational plans for local production of the materials and structures

required for vegetable growing, as well as organization of their accomplishment


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In the period from 2006-2010 the average annual volumes of the actual vegetable and potato

production, export and domestic consumption have been as follows:

Land areaLand areaLand areaLand area

/thousand ha//thousand ha//thousand ha//thousand ha/

Gross ProductGross ProductGross ProductGross Product

/thousand /thousand /thousand /thousand

tonnes/tonnes/tonnes/tonnes/

Annual Domestic Annual Domestic Annual Domestic Annual Domestic

Demand Demand Demand Demand

//// thousand tonnes /thousand tonnes /thousand tonnes /thousand tonnes /

ExportExportExportExport

//// thousand tonnes thousand tonnes thousand tonnes thousand tonnes ////

VegetablesVegetablesVegetablesVegetables 24,3 795,6 750-800 1,9

PotatoPotatoPotatoPotato 31,9 569.5 550-580 2,8

TotalTotalTotalTotal 56,2 1365,1 1300- 1380 4,7

Within the previous five years the annual average volume of crop production has made up

approximately 240-250 kg per capita, which is a high figure. Meanwhile, the aforementioned

statistical data demonstrates that the production volume generally meets the domestic consumption,

processing, seed farming and other requirements. Essentially, large scale production of vegetables and

roots is not organized in order to export them from Armenia. Approximately 0.3 % out of the

produced amount is exported.

There is approximately 450 thousand ha arable land in Armenia, 232 thousand of which is

irrigated. 33% of the arable land (150 thousand ha) is not properly used. Thus, our country’s

agriculture has great potential in terms of land use. The scene becomes more obvious, when we take

into consideration that the available water resources are underutilized. Only 2.1 billion m3 fresh

water is used annually out of approximately 7.3 billion m3 fresh water reserves, and 1-1.1 billion m3

of which is used for irrigation purposes. Thanks to the 8 climate zones of Armenia there is great

potential for high variety production, development of more intensive schemes for massive production

in various zones and for the development of science-based production.

2. 2. 2. 2. Vision of the AHPC Vision of the AHPC Vision of the AHPC Vision of the AHPC for the Development for the Development for the Development for the Development Perspectives of Crop Production in ArmeniaPerspectives of Crop Production in ArmeniaPerspectives of Crop Production in ArmeniaPerspectives of Crop Production in Armenia


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According to the Armenian Harvest Promotion Centre, the main reasons for underutilizing

these or other potentials for the development of crop production are completely targeting in the

domestic market and the underestimating export opportunities. Huge well-organized works are to be

done in order that Armenian crop products could meet the following requirements of foreign

markets:

• There is a serious lack of large amount of products required in foreign markets, though all the

necessary resources are available for their production;

• Production is strictly seasonal in nature and there is lack of appropriate product reserves for

regular year-round supply of appropriate batches of products for export, as well as logistic

capacities;

• Due to small-scale production, product reserves are also insufficient in terms of the quality

standards required in foreign markets, first regarding their appearance and sizes;

• On top of that, production is organized with outdated technologies and poor technical

equipment which results in low crop yield; costs are not optimized and often their prices are

not competitive in foreign markets.

Hundreds of thousands of farms do not receive sufficient consultation on the requirements of

foreign markets, in particular, regarding product sorts, amount, supplying schemes and quality.

Agricultural production is strictly seasonal in nature and is mainly organized in the open field. The

existing greenhouses also tend to meet only the demands of domestic market. In terms of technology

and effectiveness they fall behind the developments taking place in the world and they are absolutely

non-competitive in foreign markets in accordance with any criteria. In the existing greenhouses the

vegetable crop yield fluctuates between 15-25 kg per 1 m2, while modern greenhouses are able to

provide 45-100 kg product depending on the applied technological equipment, except for the modern

(approximately 3-4 ha)greenhouses built during the previous 1-2 years.


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In the result of lack of large export volumes especially the appropriate capacities of the value

chain are underdeveloped, including cool storage, sorting and packaging facilities, as well as the

amount of the appropriate means of transportation.

The Armenian Harvest Promotion Centre finds that Armenia has sufficThe Armenian Harvest Promotion Centre finds that Armenia has sufficThe Armenian Harvest Promotion Centre finds that Armenia has sufficThe Armenian Harvest Promotion Centre finds that Armenia has sufficient opportunities for ient opportunities for ient opportunities for ient opportunities for

the upcoming 7the upcoming 7the upcoming 7the upcoming 7----10 years: 10 years: 10 years: 10 years:

a)a)a)a) Mostly by means of attracting private investments to establish approximately 500 ha stateMostly by means of attracting private investments to establish approximately 500 ha stateMostly by means of attracting private investments to establish approximately 500 ha stateMostly by means of attracting private investments to establish approximately 500 ha state----ofofofof----

thethethethe----art heating and 1500art heating and 1500art heating and 1500art heating and 1500----2000 ha non2000 ha non2000 ha non2000 ha non----heating greenhouses and approximatelyheating greenhouses and approximatelyheating greenhouses and approximatelyheating greenhouses and approximately

12000120001200012000----13000 ha new additional 13000 ha new additional 13000 ha new additional 13000 ha new additional openopenopenopen----field farms clusterfield farms clusterfield farms clusterfield farms cluster, thus, thus, thus, thus multiplying current volumes of multiplying current volumes of multiplying current volumes of multiplying current volumes of

vegetable production;vegetable production;vegetable production;vegetable production;

b)b)b)b) By interlinking the open field and greenhouse capacities, to make vegetable and roots By interlinking the open field and greenhouse capacities, to make vegetable and roots By interlinking the open field and greenhouse capacities, to make vegetable and roots By interlinking the open field and greenhouse capacities, to make vegetable and roots

production year round with at least 600000production year round with at least 600000production year round with at least 600000production year round with at least 600000----700000 tones product reserve in complience 700000 tones product reserve in complience 700000 tones product reserve in complience 700000 tones product reserve in complience with with with with

export requirements;export requirements;export requirements;export requirements;

c)c)c)c) To develop the entire value chain of the cluster for organizing such largeTo develop the entire value chain of the cluster for organizing such largeTo develop the entire value chain of the cluster for organizing such largeTo develop the entire value chain of the cluster for organizing such large----scale production scale production scale production scale production

rangingrangingrangingranging from sorting, packaging, cool storage from sorting, packaging, cool storage from sorting, packaging, cool storage from sorting, packaging, cool storage facilitiesfacilitiesfacilitiesfacilities up to quality monitoring and up to quality monitoring and up to quality monitoring and up to quality monitoring and

assessment, as well as the capacities for the organiassessment, as well as the capacities for the organiassessment, as well as the capacities for the organiassessment, as well as the capacities for the organization of transportation and realization of zation of transportation and realization of zation of transportation and realization of zation of transportation and realization of

the products in foreign market;the products in foreign market;the products in foreign market;the products in foreign market;

d) ByByByBy creating the aforementioned greenhouse and opencreating the aforementioned greenhouse and opencreating the aforementioned greenhouse and opencreating the aforementioned greenhouse and open----field product volumefield product volumefield product volumefield product volumessss to insure the to insure the to insure the to insure the

effectiveness of eeffectiveness of eeffectiveness of eeffectiveness of enhnhnhnhaaaancing logistic capacities for export and overcome the current negative ncing logistic capacities for export and overcome the current negative ncing logistic capacities for export and overcome the current negative ncing logistic capacities for export and overcome the current negative

bbbbalance of motor vehicle import and export volumes, which is equivalent to increasing the alance of motor vehicle import and export volumes, which is equivalent to increasing the alance of motor vehicle import and export volumes, which is equivalent to increasing the alance of motor vehicle import and export volumes, which is equivalent to increasing the

annual export volumes of crop products at least 40annual export volumes of crop products at least 40annual export volumes of crop products at least 40annual export volumes of crop products at least 40----fold and fold and fold and fold and replace replace replace replace 40404040----fold increase, as well as fold increase, as well as fold increase, as well as fold increase, as well as

in terms of this product group, replacing the 13,5 fold deficit in expin terms of this product group, replacing the 13,5 fold deficit in expin terms of this product group, replacing the 13,5 fold deficit in expin terms of this product group, replacing the 13,5 fold deficit in export volumes as compared ort volumes as compared ort volumes as compared ort volumes as compared

with import volumes in the balance of foreign tradewith import volumes in the balance of foreign tradewith import volumes in the balance of foreign tradewith import volumes in the balance of foreign trade recorded in 2010 with at least 2,8recorded in 2010 with at least 2,8recorded in 2010 with at least 2,8recorded in 2010 with at least 2,8----3 fold 3 fold 3 fold 3 fold

surplus.surplus.surplus.surplus.

The following has provided the The following has provided the The following has provided the The following has provided the frameworkframeworkframeworkframework for the aforementioned projectsfor the aforementioned projectsfor the aforementioned projectsfor the aforementioned projects::::

� Food product developments occurring in foreign markets;

� The favorable climate conditions of Armenia for the development of both heating and non-

heating greenhouses, as well as open-field crop cultivation at 500-2500 m elevations;


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� The success of several small countries previously with not so important roles in foreign

markets, which have become very active during the last decade;

� The constantly growing demand for the Armenian harvest in foreign markets strengthend by

the experience of several food exporting companies.


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The required components of the mentioned cluster are as follows:

1. Crop producers:producers:producers:producers:

• Open-field farms located in all the regions of the Republic;

• Small and medium crop producers;

• Existing greenhouses and new greenhouses to be established;

2. SelectionSelectionSelectionSelection----seed farming, educational, research and practiceseed farming, educational, research and practiceseed farming, educational, research and practiceseed farming, educational, research and practice capacities of vegetable production,

as well as specialized institutions;

3. Sorting and packagingSorting and packagingSorting and packagingSorting and packaging facilities for crop production, as well as specialized companies;

4. Cool storageCool storageCool storageCool storage facilities and specialized companies;

5. The capacities for carrying out quality monitoring and assessmentquality monitoring and assessmentquality monitoring and assessmentquality monitoring and assessment of the crop products, as well

as specialized companies;

6. Capacities for transportingtransportingtransportingtransporting crop products to foreign markets and specialized companies (motor

vehicle, ferries, etc.);

7. Capacities for the realization of the products in foreign marketsforeign marketsforeign marketsforeign markets and specialized companies.

3. 3. 3. 3. The AHPC’s strategy on the creation of crop production and export clusterThe AHPC’s strategy on the creation of crop production and export clusterThe AHPC’s strategy on the creation of crop production and export clusterThe AHPC’s strategy on the creation of crop production and export cluster


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Armenian cluster on vegetable production and exportArmenian cluster on vegetable production and exportArmenian cluster on vegetable production and exportArmenian cluster on vegetable production and export

Cooperating AgenciesCooperating AgenciesCooperating AgenciesCooperating Agencies Supporting AgenciesSupporting AgenciesSupporting AgenciesSupporting Agencies

Coo

pera

tin

g A

gen

cies

Cooperating Agencies

Water supply

capacities

Energy producers

and suppliers

Design and

construction

companies

Quality monitoring

and assessment

institutions

Financial

institutions

Sorting and packaging

facilities

Planting material producing

and supplying companies

Cool storage and

maintenance facilities

Greenhouse producing

companies

Selection-seed farming and

innovation companies Cooperating Agencies

State agencies

The Armenian Harvest

Promotion Centre

International institutions

Educational institutions

Agricultural NGOs


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CropCropCropCrop PPPProduction roduction roduction roduction

Comparison of the annual average real production of fresh greens and the main vegetables and

the domestic demand in the period from 2006-2010.

Land areaLand areaLand areaLand area

/tousand /tousand /tousand /tousand

tonnes/tonnes/tonnes/tonnes/

Gross productGross productGross productGross product

/thousand tonnes//thousand tonnes//thousand tonnes//thousand tonnes/

Annual domestic Annual domestic Annual domestic Annual domestic

demand demand demand demand

/thousand tonnes//thousand tonnes//thousand tonnes//thousand tonnes/

The share of local The share of local The share of local The share of local

products (%)products (%)products (%)products (%)

All cabbage sorts All cabbage sorts All cabbage sorts All cabbage sorts 3.6 128.6 125-130 98,9

CucumberCucumberCucumberCucumber 2.4 74.1 74-75 98,8

TomatoTomatoTomatoTomato 6.7 293.0 290-295 99,3

PepperPepperPepperPepper 1.7 50.0 54-55 90,9

EggplantEggplantEggplantEggplant 1.1 38 40-41 92,7

Table beetTable beetTable beetTable beet 0.7 15.0 15-15.5 96,8

Table carrotTable carrotTable carrotTable carrot 1.0 22.8 20-21 99,0

OnionOnionOnionOnion 2.2 53.8 60-65 82,9

GarlicGarlicGarlicGarlic 0.9 9.1 9-9.5 95,8

GreensGreensGreensGreens - 60.0 60-70 85,7

The above table demonstrates that the product volumes of the main types of fresh vegetables

and greens in Armenia do not exceed the maximum domestic demand and, especially in terms of

onion, greens, pepper and garlic, there is a considerable lack of production volumes. This means the

required amount of several vegetables are not produced for export purposes. Certainly, taking into

consideration the strict seasonality of production, in summer and winter months the production

exceeds the domestic demand which generates product reserves for export. In parallel with the strict

seasonality, the amount of the reserve is limited due to the product appearance and sizes. And, on

contrary, during non-season period a part of domestic demand (approximately 20-21 thousand tonnes

of vegetable and roots per year) is supplied by importers.

In the Republic there is an opportunity to produce vegetables, greens and roots in order to

exceed the aforementioned annual volumes. The estimated volumes mentioned by the Centre

(600000-700000 tonnes) are based on the estimations aimed at overcoming the current negative

balance of import and export volumes and the strict seasonality of production in the Republic, as well

as ensuring the effectiveness of logistic capacities for export.


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According to the Centre, the ways to achieve the aforementioned results are as follows:According to the Centre, the ways to achieve the aforementioned results are as follows:According to the Centre, the ways to achieve the aforementioned results are as follows:According to the Centre, the ways to achieve the aforementioned results are as follows:

1.1.1.1. Enhancing openEnhancing openEnhancing openEnhancing open----field cultivation:field cultivation:field cultivation:field cultivation: According to the Centre temporary non-arable lands and the

available water resources allow to enhance the production of vegetables, greens and roots at least in

12-13 thousand ha open-field. Armenia is located 300-4000 m above sea level which allows to

produce various types of high-value crops, and its 8 climate zones give the opportunity to

considerably prolong the harvesting period;

2.2.2.2. Intensive development of modern greenhouse production:Intensive development of modern greenhouse production:Intensive development of modern greenhouse production:Intensive development of modern greenhouse production: Organization of large-scale

production in heating and non-heating greenhouses may become a crucial step to overcome the lack

of product reserves for export, the low level of crop yield, strict seasonality of production, great

harvest losses conditioned by damage done by hail and frostbite which are the 4 main weaknesses of

Armenian crop production. In particular, in terms of tomato, pepper and eggplant, crop yield in

heating greenhouses exceeds open-field figures at least 10-fold, and in case of cucumber, even 20-25-

fold. As to the climate, Armenia has favorable conditions for competitive vegetable, greens, berries

and flowers production in greenhouses. In particular, the duration of sunshine during a day, the

number of sunny days per year the intensity of solar radiation and other appropriate factors are

crucial for the effective operation of greenhouses. Meanwhile, daytime and night-time temperatures

considerably differ from each other, which promotes plant growing and taste qualities.

According to the Centre, it is possible to build approximately 500 ha heating and 1500-2000 ha

non-heating state-of-the-art greenhouses within 5-7 years in several regions located in different

climate zones.

In particular, the Centre already carries out certain preparatory and organizational works for

the establishment of the greenhouse zone in the vicinity of the Yerevan TPP. In the first stage of the

program we anticipate building approximately 50-53 ha greenhouses within 3 years with their

appropriate sorting, packaging, cool storage and other logistic facilities. The selection of the

aforementioned zone is conditioned by the availability of appropriate land areas, water and energy

resources, as well as by the affordable central heating system of the Yerevan TPP.


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It is very important that the construction of the greenhouses will be done in certain 6-7

greenhouse zones, as a rule. This will enable us to build both logistic and water supply infrastructures

and to receive synergetic results լ through combining the works and capacities regarding buying and

selling, development of state-of-the-art solutions and saving in the required investments for building

logistic (seedling growing, cool storage, sorting, packaging, etc.) capacities.

SeleSeleSeleSelection ction ction ction ––––seed farming and research and practice seed farming and research and practice seed farming and research and practice seed farming and research and practice capacities in vegetable productioncapacities in vegetable productioncapacities in vegetable productioncapacities in vegetable production

Increasing the effectiveness of vegetable production and the competitiveness in a foreign

market is a permanent issue for any producer in any country. Taking into account the peculiarities of

the country’s climate, it is possible to bring several crops into accordance with the given conditions

through the development of selection-seed farming capacities. The development of such capacities is

a key precondition both for improving crop yield, frost-resistance, preservation ability and the ability

to undergo long-distance transportation, as well as for improving the sizes, nutrient and eating

qualities.

The volumes of seed and seedling consumption are going to increase substantially, especially

in conditions of the anticipated sharp increase in production and export volumes. Organization of

seed and seedling production in Armenia must become a solution for the effective supply of seeds and

seedlings. This, in its turn, requires radical improvements of scientific-research and experimental

activities in the given sphere. All the more, effective methods have been developed in Armenia,

which are still applied in production. Particularly, we can find such developments in the Scientific

Center of Vegetable and Industrial Crops under the RA Ministry of Agriculture, in the Institute of

Hydroponics Problems and in other institutions. In parallel to the development of the crop

production cluster, the developments of the institutions will become more and more demanded.

Large production companies will become their strategic partners and clients. In particular, the high

eating qualities of the local or locally improved sorts of tomato and cucumber should be taken into


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account. The further improvements may provide good perspectives for the development of open-field

and greenhouse production.

Quality MQuality MQuality MQuality Monitoring and onitoring and onitoring and onitoring and AAAAssessmentssessmentssessmentssessment

This is one of the milestones for the formation and development of the cluster. In this matter,

the main actions are divided into two groups: institutional and technical. One of the main principles

for the first group is to have an institution which will be interested in the development of production

and export, enhancement of the popularity and reputation of the Armenian harvest. The other key

principle of the institution’s activity is providing full independence for the food quality monitoring

and assessment; exclusion of interference by state agencies, producers, consumers or other buyers.

The aforementioned independence is essential especially for the development of long-term

sustainable contractual order system between producers and buyers (exporters). It is obvious that

nowadays the producers of agricultural products, especially small farms, as a rule, are not able to

present and advocate their rights on the product quality in purveyor-buyer relations. In the process

of carrying out quality assessment the buyer remains a unilateral dictator. In this respect, it's needed

to have an independent and impartial institution.

The other key precondition in this case is building laboratory capacities with the appropriate

technical equipment, which will allow carrying out quality assessment in compliance with the norms

and standards established in the foreign trade. On the one hand, together with the system of quality

monitoring, during production this will give the right impetus to producers, and will increase the

negotiation opportunities with wholesalers, the reputation of the Armenian harvest in foreign

markets, as well as will lay the foundation for the creation and promotion of the general brand of the

Armenian harvest, on the other.


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The institutional solution and technical capacities of the system will also ensure high speed

operation. In this respect, together with technical equipment it's very important to establish precise

and facile regulations regarding the institution’s responsibility and services performance.

CCCCapacities for the Transportation of apacities for the Transportation of apacities for the Transportation of apacities for the Transportation of VegetableVegetableVegetableVegetables tos tos tos to Foreign MForeign MForeign MForeign Marketsarketsarketsarkets

In the result of small-scale export volumes, essentially there was no need for building and

developing large-scale and technically equipped motor vehicle capacities in Armenia. The present

quantity and technical capacities of the Armenian freight transporting companies are at least 8-10-

fold less for transporting 600-700 thousand tonnes of crop annually. In case of such export volumes

2000 unit modern trucks will be needed. In case of such volumes we should assess it quite feasible for

a few Armenian production companies to obtain and operate trucks through leasing or by other

means.

Even now when there are a lot of things to do in terms of sustainable road schemes and

regulation of the procedures for importing crops into other countries, the experience of several

companies proves that it is quite feasible to create state-of-the-art truck system for export and

profitable sale of crop products. These procedures which have already been launched need to be

developed in terms of expansion and sustainability.

Certainly, in terms of road schemes for freight transportation, there are still a lot of things to

do. In particular, till now only one route is available to export crop products to the RF markets -

through the territory of Georgia, Upper Lars checkpoint, which is famous for its instability and

dependence on climate and other conditions. In terms of volume restrictions and expensiveness, air

transportation is only applicable for a small part of food and cannot be considered as an alternative

solution. Increase in export volumes will require utilization of alternative routes. Obviously, the

solutions can be possible only on the level of inter-governmental relations with Georgia, Iran and the

RF. The creation of such alternative routes will strengthen the reliability of freight transportation,


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promote the competitiveness, cut back on transportation costs and considerable mitigate the

unilateral dependence on the only route.

CCCCapacitapacitapacitapacities for the ies for the ies for the ies for the RealizationRealizationRealizationRealization of the Pof the Pof the Pof the Products in roducts in roducts in roducts in FFFForeign Marketsoreign Marketsoreign Marketsoreign Markets

The RF, Middle East and European markets are considered to be potential markets for export

and realization of the Armenian harvest. In order to enter new markets and reach its successful

expansion it is crucial to conduct feasible and detailed marketing, introduction of quality standards

and control. On top of that, it should be taken into account that, as a rule, the competitors differ from

country to country. At present the Centre is conducting market research. The detailed researches

and SWAT analyses will allow precisely defining the possible effective positions and expectations of

the Armenian harvest in foreign market, based on which production and investment programmes

and the appropriate policy will be clarified.

Taking into account the small production volumes in Armenia compared with the competitor

countries in the first phase, it is very important to create institutional circles which will allow to

realize the Armenian products by different agencies with justified policy and actions. In particular, it

is expedient to create the general brand and develop it with joint efforts, as well as maintain its

rating. The Centre has initiated the process of the creation of such brand, which will later be

presented to potential producers and wholesalers for making joint decisions.

The next important precondition for the successful realization of the products is organization

of reliable information sources regarding the markets and the permanent provision of sufficient

information to the participants of the cluster. This may be effective by the joint actions of the

participants also.

The next important precondition is the creation of the planned logistic (cool storage,

packaging, transportation, etc.) capacities in the export markets.


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MMMMain approaches ain approaches ain approaches ain approaches forforforfor attracting investmentsattracting investmentsattracting investmentsattracting investments

The international experience proves that the optimum sizes of a greenhouse fluctuate between

4-6 ha. For the construction of such a greenhouse 6-13 mln USD investment will be required

depending on constructive solutions, technological equipment and crop selection dictated by climate

conditions. It is not realistic to expect the financial resources required for the construction of 100-

125 greenhouses from the state budget.

Here we can mostly speak about private investments. Nevertheless, it’s not realistic to expect

such amount of investments from local investors or attract them from local financial markets. It is not

realistic also that foreign private investors will invest such large amounts of investments at the

beginning of a project in Armenia.

The most feasible scenario is that investments will be attracted first of all from local business

communities. Discussions with several businessmen prove this. There are several businessmen who

will fund 15-20 % from the total program value; the rest of the amount will be attracted from foreign

financial markets. In this case, we will need to solve the issue of making those markets accessible to

the Armenian businessmen. It’s one of the main tasks of the Armenian Harvest Promotion Centre

(AHPC).

Numerous tools can be applied here. Nevertheless, it’s very important that both local business

communities and foreign financial institutions believe that the program is of great importance for the

Republic of Armenia, which supports its implementation. In particular, within the first 2-3 years of

the program implementation, as an example of pursuing this policy, we may consider the provision of

20-25% state guarantee out of the total value of the program in order to attract investments from

financial markets.

The successful implementation of the first phases of the program will lay the foundation for

applying more practical and facile financing mechanisms during the further years.


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As to the attractiveness of the investment program, the following factors shall be taken into

account:

• Zero rate VAT is applied for export of goods from Armenia;

• Direct agricultural producers are exempt from the profit tax in the part of the income derived

from the sales of agricultural products;

• The payment deadlines for the VAT calculated by the customs offices for specific products

imported under the program are postponed for three years after customs declaration, in case if

the customs value of the products exceeds 300 mln AMD;

• Unlike Turkey, Iran, Israel, the Netherlands, Spain, Morocco , China and similar exporting

countries which are not considered to be CIS member countries, exports from the Armenia

into the RF and other CIS countries are exempt from 15% customs duties;

• The Centre solves the problems regarding allocation of lands, registering land rights and other

issues connected with supplying thermal and electrical energy, gas and water to the

greenhouse zone, as well as building common water discharge mains or energy generating

sources by relieving the investors of these time-consuming problems, which often do not have

anything in common with their professions, as well as considerably cutting back on the

expenditure.


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The implementation of the present program may have multi-layer positive impacts on the

country's socio-economic life;

• During the process of the creation of the cluster's volume chain approximately 1 billion USD

investment is anticipated in the economy of the Republic;

• Agricultural production and export volumes will increase by 600-900 mln USD $ or the

production volumes will increase by 35-41% compared with 2010, which is equal to 59-69%

increase in the country's total exports;

• Besides solves the problems of the realization of the greenhouse and other adjacent rural

households' products, the creation of logistic (cool storage, sorting, packaging, transportation

and realization) capacities will also provide such services to other (seasonal) producers in

other areas and will gradually have a snowball effect on the further development of crop

production;

• The establishment of about 150 decentralized cool storage facilities (each with 100-150 tonnes

capacity) in the greenhouse area and totally 5-6 centralized cool storage facilities (each with

50-60 tonnes capacity) out of that area will become a precondition for the maintenance and

further realization of the products of small and medium farms;

• The creation of an “umbrella brand” for the Armenian harvest must be one of the most

important anticipated outcomes;

• Besides improving the country’s balance of payments, such increase in export volumes will

contribute to the enhancement of new transportation capacities linking the country’s

economy to foreign markets, as well as new realization capacities and schemes, which will

give an impetus and will act as a platform for the expansion of the markets of other branches

also.

• The establishment of a few large transportation companies with a capacity of about 2000

vehicles will lead to decrease in transportation costs. This will enable us to overcome one of

the most vulnerable issues regarding the Republic’ transportation sector. At present, motor

vehicle import volumes exceed the export volumes by 3.7 fold, and, in case of three-fourths of

4.4.4.4. The main The main The main The main sociosociosociosocio----economic economic economic economic outputs anticipatedoutputs anticipatedoutputs anticipatedoutputs anticipated from the project implementationfrom the project implementationfrom the project implementationfrom the project implementation


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the imported goods the vehicles return without goods, and all transportation are referred only

one way. In 2010 the negative balance of export and import volumes by motor vehicle made

up 569 thousand tonnes.

• The project implementation will positively affect to the mitigation of the country’s

unemployment problem. It is anticipated to create about 35-40 thousand new workplaces

inside the cluster.

• The project will have a positive impact also on local market by mitigating seasonal fluctuations

of vegetable prices. Their import volumes will be considerably decreased.

• The number of orders of the design and construction, educational, innovative as well as

common financial and insurance agencies will increase; their capacities will be developed and

modernized;

• One of the most important outcomes of the program is the creation of a new economic cluster

with its value chain and building the appropriate capacities for entering foreign markets,

formation of an institution with appropriate experience and skills, which is considered to be

one of the key factors for the development and implementation of large-scale programmes.


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1. Preparation of the master plan for the creation of economic cluster of greenhouse production and

export based on the consultations of international greenhouse organizations;

2. Preparation of investment portfolios and definition of the locations of the appropriate land areas in

order to organize greenhouse production in 6-7 greenhouse zones;

3. Launch of the program on the establishment of a greenhouse zone in approximately 50-53 ha

production area in the vicinity of the Yerevan TPP;

4. Studying the greenhouse structures, technologies and equipments of the Netherlands, Israel,

France, Germany, Korea and other countries, establishing relations with the producers and

developing optimum mechanisms for cooperating with them in order to provide technical

assistance to the investors;

5. Studying the vegetable markets of Russia, Europe and Middle East; conducting negotiations on

product realization;

6. Preparation of the program on building non-governmental capacities of crop product quality

assessment and monitoring inside the cluster;

7. Preparation of the program on the creation of legal and institutional mechanisms for the general

“umbrella brand” of the Armenian harvest and its utilization;

8. Development of schemes for making foreign financial sources accessible to the Armenian investors

and conducting negotiations for their organization;

9. Building capacities for providing technical and professional assistance to the participants of the

cluster regarding the following matters:

• Selection of greenhouse and cool storage technologies and equipment, packaging materials,

equipment and packing, vehicles and their spare parts, as well as selection of suppliers thereof;

• Selection of schemes for attracting financial resources and obtaining material and technical

resources from foreign companies:

• In the selection of plant growing technologies for the greenhouses, organisation and

development of production, meanwhile disseminating local and international best practices;

5.5.5.5. The main activities of the AHPC during the upcoming years The main activities of the AHPC during the upcoming years The main activities of the AHPC during the upcoming years The main activities of the AHPC during the upcoming years


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• In the conclusion of contracts and entering sales markets, as well as in protecting the interests

of the cluster participants in foreign markets;

• In pursuing effective and harmonized pricing policy in sales markets;

• In developing means to ensure cash flows and developing business plans for the cluster

participants; financial management, organization of accounting and tax accounting;

10. Preparation of grant programmes in order to support cluster development programmes,

conducting negotiations with donors for attracting donations, including development of

solutions, to use “fast start” mechanisms and sale of CDM quotas;

11. Development of cooperation mechanisms in order that the AHPC could cooperate with state

agencies, scientific and business communities, as well as formation of a cooperation council.


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Documents

AHPC strategy