Armenian Leaders Place Hopes in Farm Reforms

Armenia’s government expects to see dramatic improvements to the agriculture sector thanks to a raft of reforms adopted after last year’s poor harvest, but farmers themselves remain sceptical.

“Last year, no one brought in a decent harvest, and in general agriculture is in a depressed state,” Hrant Arakelyan, who has a ten-hectare farm in the village of Lusarat in the southern Ararat region, told IWPR. “Conditions are very difficult in the villages, and farmers cannot consider themselves secure.”

Most of the 330,000 farms that emerged from Armenia’s privatisation process are small, consisting of at just one or two hectares of land, and they find it hard to absorb unexpected costs.

In 2010, farmers were hit by high prices for water, pesticides and machinery rental. The result was a 12 per cent year-on-year increase in market prices, with some foodstuffs like fruit retailing at four times their previous value.

As Tatul Manaseryan, head of the Alternative Research Centre, explains, “Agriculture started getting attention once the problems had reached crisis point and had begun seriously affecting not just the poor and the middle classes, but the highest levels of government. They began to realise it wasn’t only affecting the social and economic situation, but also threatening their own political authority.”

Concerned about the situation, President Serzh Sargsyan ordered his ministers out to the countryside to look at the causes of the problem. In December, he appointed a new agriculture minister, Sergo Karapetyan, formerly head of a food canning company, who replaced two deputy ministers with young graduates of Armenia’s Agrarian University.

To soften the impact of future economic blows, the government ordered banks to improve credit arrangements for farms and lifted sales tax on agricultural chemicals and other inputs.

Despite such measures, Arakelyan said business was proving as unprofitable this year as in 2010.

“Last year I spent 1.16 million drams [3,160 US dollars], and this year I’ve spent 1.25 million,” he said. “My average grape harvest is just ten or 12 tons, at 130 drams per kilogram. That means the produce doesn’t even pay for itself, let alone make a profit.”

Experts say many of the recommendations made last year have not been implemented.

Hovsep Khurshudyan of the Armenian Centre for National and International Studies suspects that farmer-friendly reforms have run up against resistance from powerful businessmen with close ties to government.

“The clash between the interests of importers and local producers is preventing them from pursuing real agricultural reforms. Importers now have control over all the levers of government, and they’ve created a vicious circle in which imports are three times as high as exports,” he said.

Officials insist the reforms not just token gestures, and say that freeing imported agricultural machinery and chemicals from taxes had had a direct positive effect on food prices.

“For the first time since independence, the Armenian farmer has sensed that the state is campaigning seriously and comprehensively to resolve the many problems with production. The ministry is increasingly a partner for the farmer… we can only regain the farmer’s trust through concrete action,” Agriculture Minister Karapetyan said.

Since April, farmers have been able to get cheap loans, where the state covers four per cent of a 14 per cent annual interest rate, and an eight per cent subsidy for farmers working in highland or frontier areas. Last year, annual interest on the average agricultural loan was charged at 22 per cent. (See Armenian Farmers Face Ruin in Credit Crunch.)

Although the banks have already issued more than 11 million dollars in these subsidised loans, farmers say they cannot borrow enough.

“The money isn’t available to everyone. I’m not complaining – I’ve had a two-year loan of 2.2 million drams under this programme, but it isn’t enough to work the land,” Arakelyan said. “We need loans not just for a season, but for a longer period of five to seven years, and bigger amounts.”

At the moment, he said, the main challenge was the high cost of irrigation water, currently charged at 11 drams per cubic metre.

The agriculture ministry is forecasting ten per cent growth in farming production this year.

“I’m not entirely satisfied with the pace of reform, but the process is continuing and I think we will end the year with positive indicators,” Karapetyan said.

Naira Melkumyan is a freelance reporter in Armenia.