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Modernizing Armenian agriculture focus of new World Bank study, June 2017

20 June 2017

In Armenia, a modern, export-oriented agriculture sector holds the most promise for future growth, according to a new World Bank study.

The study, Modernization and Commercialization of Armenian Agriculture, captures the main conclusions and recommendations from a series of technical notes on agriculture, ranging from horticulture exports, agricultural extension and food safety to risk management, agricultural land markets and public expenditure.

The idea behind the study, to which FAO provided inputs, is to inform discussions with the Government on options for sector reform and investment.

It’s about finding ways to bridge the divide between “the small, semi-subsistence farms that dominate Armenian agriculture and the longer-term vision of export-driven growth,” said Bekzod Shamsiev, Senior Agricultural Economist with the World Bank.

The notes also draw on other countries’ experiences in dealing with similar challenges.

Sector growth

From 2000 to 2015, Armenia’s agricultural output grew by an average of 5.4 percent, with agricultural export growth doubling from 2010 to 2013.

But exports have slowed down in the last few years, due in part to low agricultural production in 2014 and the weakening economic situation of nearby important export markets.

According to the study, agricultural sector growth will depend on greater productivity among farmers and agro-processors, as well as the ability to add value and compete in international markets.

Developing competitive edge

Developing a dynamic export market means turning the country’s comparative advantage, particularly in horticulture, into a competitive edge.

That will entail an improved enabling environment for production and exports, and greater investment in physical infrastructure, such as storage. But that isn’t enough.

The country is landlocked, transit routes are limited and distances to major markets can be long.

The country needs to build an export industry that emphasizes quality, high value and product differentiation, so as not to compete on cost alone.

That will involve investing in technology and logistics, public-private partnerships and human capital, as well as in building a competitive cluster of horticultural products.

The quality and breadth of public agricultural extension services also need to be strengthened.

Food safety

Armenia became a member of the Eurasian Economic Union (EEU) in 2015 and recently re-aligned its food safety legislation with that of Russia and other Commonwealth of Independent State countries to comply with EEU standards.

This followed earlier efforts to harmonize with European Union standards. As such, there is a lack of clarity on how to interpret current food safety laws in the country.

The study recommends strengthening the operationalization of food safety laws and regulations, as well as the quality of national consulting and accreditation.

Improving access to international accreditation services could help the country tap into a wider range of international markets for the more progressive elements of the food industry.

Increasing industry awareness on the costs and obligations of modern food safety, and training a new generation of food industry players on the EEU food safety system, through vocational or university diploma programmes, are also crucial.

Strengthening services

The study also points to the importance of strengthening agricultural land markets and of promoting agricultural insurance.

High value fruit and vegetables destined for export markets are vulnerable to climate risks, with producers often disinclined to invest in modern technology.

To help deepen the debate in Armenia and provide useful insights, the World Bank study examined how other countries in Europe and Central Asia are mitigating production risks through agricultural insurance programmes.

The study also looked at trends in public expenditure in agriculture.

“Public investment has fallen since 2010, with most of the capital expenditure going toward irrigation and water supply and drainage projects,” Shamsiev said. “But if you are going to build a knowledge-based economy in Armenia capable of modernizing and commercializing agriculture, you need to allocate sufficient spending for essential agricultural services, including extension, food safety, border controls and the management and prevention of crop and livestock disease.”

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