2012 was productive for Armenian agriculture. Fruits and vegetables flooded the Ararat Valley, the main agricultural region of the country. But instead of gaining additional income, farmers lost what they earned in the previous years.
Supply of peaches, plums, grape and some vegetable types exceeded the demand, resulting in average prices of about $0.25-1.25. The prices were formed by resellers who pay half of it at best or a third in some cases. But even that price does not allow farmers to make profit from their hard work, because Yerevan cannot consume fruits and vegetables in quantities offered.
Peasants had to sell their products, for example, peaches, at a ridiculously low price of $0.13 per kg. Factories, for example, the canned food factory in Borodino in the Ararat Region or Spaika, a company exporting fruits and vegetables from Armenia) select only the best fruits and leave the rest. Moreover, the little cash they offer is not paid immediately. They are handed only in a few months after being processed in affiliated banks. Farmers are forced to take loans at the very same banks before they get their payments.
Armenian fruits and vegetables have high demand in Russia due to their ecological benefits. Prices for fruits and vegetables in Russia are tens of times higher. Armenia could have organized exports of high-quality products to Russia, not to mention other CIS states, instead of having it rot in fields and gardens. The question is why cannot Armenian farmers organized exports of their products themselves?
Gagik Agajanyan, Executive Director of Apaven, an international transport company, told VK that exports of any products made in Armenia do not undergo taxing. The mechanisms are simple, cargo registration are customs offices on the border is realized basing on documents presented by authorities of communities where the fruits were grown. Then, an export declaration is presented. Verkhny Lars is open, there are no car transport problems in Georgia, illegal fees are only common in North Caucasus republics. Although Russian executives are trying to resolve the problem. Thus, it seems that nothing gets in the way of agricultural exports from Armenia, at first view. However, Armenian tax laws set a 20% VAT for any goods being exported.
Exporters get the sum back later, but the process takes a year. Where would a farmer get enough cash to pay VAT and wait a whole year to get the money back. The government does not let itself remain idle. Armenian Deputy Minister for Agriculture Robert Makaryan said that if processing and exporting enterprises of Armenia use their potential at full power, there would be not problems in realizing agricultural products. A state structure monitoring harvesting and exports of products has been organized this year. President Serzh Sargsyan ordered grape prices to be set at 140 drams per kilo. Owners of factories reacted to the urge and the situation started improving.
Ara Grigoryan, Executive Director of the Yerevan Cognac Factory, the largest processing enterprise of Armenia, called the president’s 140 drams price the happy mean and decided to prepare 24,000 tons of grape in 2012, exceeding the previous year’s quantity by 3,000 tons. Purchases of grape started on September 10. The cognac factory (owned by Pernod Picard) decided to increase purchase prices to 140 drams. Grigoryan said that the factory will start signing long-term deals with farmers in spring 2013, to purchase grape for 9 years. It would help farmers solve their present problems and plan business for the future with greater harvests. Long-term contracts will encourage banks to give loans for development.
A new factory to process apricots, peaches, apples, plums and tomatoes was launched. It belongs to Euroterm and is the only agricultural processing facility built from scratch and equipped with advanced European technologies, allowing 300-500 tons of fruits and vegetables to be processed. Euroterm exports about 70% products to Russia, USA, France, Germany, UAE, Kazakhstan and Australia.
But these achievements cannot resolve the problem of realizing agricultural products in Armenia. In order to understand the reasons, one needs to recall the collapse of the USSR, when Armenian authorities started bringing their innovative plans to life. Agriculture was the first to face the impact of reforms started in the 1990s. As a result, the situation in gardens and fields this year has become unsatisfactory. Problems with realization of fruits and vegetables are caused by fragmentation of farms and lands. 430,000 farms were formed during privatization of the 1990s, an absurd figure for a country as small as Armenia. Finland, for instance, has 67,000 farms. According to the Ministry for Agriculture, only 470,000 hectares of fields were planted, which means that a farmer has an average of only 1.1 hectares of land. Specialists VK interviewed say that the optimal land size is about 100 hectares. It will allow circulation of agricultural lands, solve watering issues, fertilizers, efficient use of equipment and organized realization of products. 46% of Armenian population is agricultura, compared with 2-6% in advanced states.
These “results” were achieved after 20 years of market “reforms” and market “development”, proving that all agricultural reforms, especially privatization, were ignorant and mischievous. They were so mischievous that if there were no reforms and the collective farms of the USSR were left as they were, the result would most likely be a lot better. Belarus can boast the best confirmation of the idea. Agriculture became so shattered with the help of almost all governments since President Levon Ter-Petrosyan. Consequently, modern farming resembles that of Medieval times, unproductive and uncompetitive. The agriculture minister still calls for cooperation of farmers in order to solve all agricultural problems, including products rotting at “uncooperative” fields. Words and actions of Armenian functionaries have always been contradicting each other, although that would not stop them from announcing “increase of volumes and income of processing industry” belonging to the wealthy part of the population. The 430,000 farms of Armenia will probably feel no better from this increase.