Armenia’s agro-processing industry has been and is still considered to be one of the most important and highly efficient sectors of the country’s economy since the Soviet era. This sector is also very important with regard to ensuring the rural population’s employment and income and contributes to the formation of the food and economic safety, the agricultural and food market, as well as ensures a guaranteed and stable supply of safe and quality food products to the population.
The organizations operating in the field of agricultural products processing industry of Armenia have set themselves the task of increasing the work efficiency and the competitiveness of the manufactured products and diversifying the production portfolio. Some developing companies are successfully competing in both domestic and CIS member states’ markets, as well as international food markets and making investments for further development of the production process.
The activation of operation of the processing system and the gradual increase of export volumes have specifically contributed to the alleviation of the problem of sale of agricultural products and increase of the marketability level of agricultural farms.
In 2019, the foreign trade turnover of agrifood products, at current prices, increased by 10.7% as compared to the previous year and valued $1,671.7mln. In 2019, agrifood products worth $866.6mln ($805.1mln in 2018) were imported to the country, which is about 15.7% of total imports. Exports amounted to $796.4mln (in 2018 - $696.7mln), which is 30.2% of the total exports. In 2019, the importation of agrifood products increased by about 7.1% as compared to the previous year, while the exportation increased by 12.5%. Fresh fruits and vegetables, beverages, canned food, and fish dominate within the structure of exported agrifood products.
According to the estimates, there are about 1,600 food production enterprises in the Republic of Armenia, including:
In 2019, the share of the agricultural products processing industry within the overall gross industrial output was 34.8%, whereas within the processing industry it was 49.8%.
The production volumes of the product assortment generated from processing of agricultural products in 2015-2019 in the Republic of Armenia are provided in Table 1.
The level of production, exportation, and self-sufficiency of the main assortment of products generated from processing of agricultural raw materials and the share of local production within the sales structure in 2017-2019 in the Republic of Armenia are provided in Table 2.
The volumes of acquisition of fruits, vegetables, and grapes by enterprises of the processing industry of the Republic of Armenia in 2015-2019 are presented in Table 3.
The assortment of vegetables and fruits for purveyance has significantly increased and become extremely diverse. Nearly the full assortment of vegetables, fruits, and berries growing in Armenia is being purveyed, including beans, okra, black and red pepper, carrot, pumpkin, horse-fennel, lily and other wild plants, nearly the full assortment of berries, pomegranate, quince, plum, cherry, sweet cherry, green walnut, rosehip, mulberry, and others.
In order to increase the level of accessibility of loans provided to the companies operating in the agricultural products processing industry, enhance the contractual relations between the processors and farming enterprises on acquisition of raw materials, provide stable guarantees to farming enterprises on the sale of raw materials and expedite the processing of payments to farming enterprises for acquisition of raw materials, a program of subsidizing the interest rates of the loans provided to the agro-processing sector for purveyance of agricultural raw materials has been implemented since 2017, and within this program’s framework the share (amount) equivalent to up to 9% threshold of the targeted loans provided at a maximum nominal annual interest rate of up to 12% was subsidized, whereby the annual loan interest rate paid by the borrower was 3%. The loans to be subsidized and provided within this program were exclusively targeted towards paying the costs of the purveyed harvest. The program supported the enterprises processing fruits, vegetables, and grapes.
As a result, the program established competitive conditions for processing of payments for raw materials acquired from farming enterprises. For the first time in the last decade the cost of fruits, vegetables, and grapes purveyed in 2019 was fully paid to farming enterprises by the end of December, whereas the amount not paid to farming enterprises by the year-end for purveyance of fruits, vegetables, and grapes in 2017 equaled 1,377.8mln Armenian drams (5.9%), in 2018 - 200.4mln Armenian drams (0.7%), and in 2016 the due amount was 2,048.4mln Armenian drams, of which 110.3mln Armenian drams was due for purveyance of raw materials in 2015.
In 2019-2020, in order to improve the efficiency of the program, the categories of the loans classification within the program framework were supplemented with the new ones: for milk collection and acquisition of farm animals by slaughterhouses.
To mitigate the effects of the Coronavirus pandemic, the interest rate on the loans provided within the program framework was set at 0% until December 31, 2020, the loan repayment period was extended to 1.5 years, and the categories of the loans classification was supplemented with the new ones for purchase of fruits and vegetables and acquisition of glass jars, lids, aseptic bags, and their containers that are used for production of canned fruits and vegetables. The loans to be subsidized and provided are exclusively targeted towards paying the costs of the purveyed harvest.
In order to increase the production volumes of products of agricultural origin and agro-processed products, ensure the quality and safety requirements in compliance with international standards, enhance the competitiveness, and increase the exportation volumes, the RA Government Decree No.893-L dated July 19, 2018 approved the state assistance program for leasing (financial lending) of equipment in the food and agricultural sector of the Republic of Armenia for acquisition of new technologies and equipment through application of leasing mechanisms. Within the program framework, individuals and legal entities operating in the food and agricultural sector can through leasing purchase equipment worth up to 450mln Armenian drams. Leasing is provided for a term of up to eight years, with 20% down payment and 4% interest rate, whereas the businesses operating in the border areas and receiving social assistance have 0% interest rate.
To mitigate the effects of the Coronavirus pandemic, the interest rate on leasing provided within the program framework was set at 0% until December 31, 2020.
Extensive work is being done with regard to implementation of legislative reforms in the agro-processing sector and additional functions arising from Armenia’s membership to the Eurasian Economic Union, particularly legislative and institutional reforms, which will contribute to the development of the sector, rapid integration with the EEU, increase of the level of trust towards the quality and safety of food products manufactured in Armenia and will seriously stimulate the increase of volumes for production and exportation.