Step by step: Restoring the Diverse Mosaic of Armenia’s Rural Economy

February 26, 2010

There are about 340,000 rural farms in Armenia, with agriculture making up about 20 percent of the country's GDP. However, farmers have trouble optimizing their yields because they lack regular access to markets, professional advice, and the necessary funding for infrastructure, seeds, and fertilizers. The World Bank-supported Rural Enterprise and Small-Scale Commercial Agriculture Development Project (RESCAD), launched in Armenia in 2005, is making progress – step-by-step – in addressing these needs.

Step One: A Village United Can Break a Log

The problems of Lorut are as old as the village road. One of these problems is the main water system, which was built in 1964. The low capacity of the pipes limits not only the availability of drinking water, but also limits the water available for land cultivation and livestock breeding, and, in turn, the villagers' income.

" Half of Armenia's employment is in agriculture. Thus, development of this sector implies strengthening of communities and creation of new infrastructure, commerce, jobs, and markets. Each of these successful micro-projects under RESCAD is a key building-block laid to strengthen the foundation of the country's promising rural economy. There is no magic bullet, however, for achieving all of these goals overnight. All the stakeholders need to collaborate in order to achieve the goals step-by-step. "

Doina Petrescu

Sr. Rural Development Specialist, Task Team Leader of RESCAD

As in most small communities in Armenia, every household has its problems, which are then intertwined with the community's shared problems. To deal with these problems, community councils were created under the Community Economic Development (CED) component of the RESCAD Project. These councils are not able to resolve all issues at once, but can define priorities and the more urgent projects. The Lorut community council decided that the renovation of a four kilometer segment of the water line was a top priority.

Council member Norik Sargsyan – a village mayor during the Soviet years – thinks that this is the right decision: "There was a time when we wanted to spend on roads. The women found out about this and argued that they needed water more… clever they were to choose water."

The new water pipeline was inaugurated on the eve of the Vardavar water festival – Lorut residents' beloved holiday that celebrates love, fertility, and symbolizes purification.

Overall, the CED supported much-needed investments in 141 communities across Armenia – investments ranging from agricultural machinery and drinking water, to gasification, milk collection, rural transport, and protection from hail.

Step 2: Don't Count Your Chickens Before They Hatch

The village of Lusaghbyur is long famous for sheep breeding and traditional carpet making. Lusaghbyur has restored the old tradition of carpet weaving, and wool processing is now in demand. Continuing this resurgence, a carpet-weaving enterprise, which employs 30 women, was founded with the support of a competitive grant provided by RESCAD's Rural Small and Medium Enterprise (SME) component.

But the village lacks markets for selling their product – the women working in the enterprise say the dowry of the village brides is their biggest market. According to Anahit Khachatryan of the enterprise, "Many people try to sell us their wool, sheep breeding is developing, and the village has potential… now we just need to sell our product."

Besides grants, over 100 loans were extended for rural SME development. Financing through local banks has been provided to a variety of sectors, from horticulture to fisheries, dairy processing, and poultry farms. Loans under the Rural Small and Medium Enterprise component led to new investments, jobs, and incomes resulting in:

  • US$5.5 million lent to 132 clients through four participating banks, generating around US$10 million of investments in rural areas;
  • the creation of more than 450 new jobs – half of which for women; and
  • a 27% increase in incomes and a 30% increase in sales in project-supported enterprises.

Step 3: Two Heads are Better Than One

Low yields and a lack of agricultural business management knowledge remain the main obstacles to agricultural sector development in Armenia. In the framework of the Developing Farm Advisory / Extension System component of RESCAD, field days and seminars are arranged to address this very problem. The new potato seeds provided by the project were met first with suspicion by the farmers, then surprise, and eventually with enthusiasm.

According to Norayr Mkrtchyan, a local expert who advises the farmers of the village of Voghji, "I have cultivated land for 20 years – it is our livelihood. Some people are new to this – they just got ‘attached' to the land, with no experience in agriculture. They were at first reluctant to accept my advice, but now, after they have seen the results, we expect a wonder of a harvest this year."

The Advisory System helps increase the productivity of farms, including ten agriculture support centers that provide advice to more than 45,000 farmers each year. On average, farmers report US$200 of added income as a result of extension advice, and the extension system is becoming less and less dependent on donor support.

Step 4: You Reap What You Sow

It has been estimated that as much as 17 percent of the wheat harvest is lost in Armenia due to agricultural machinery breakages. On top of that, with seeds from previous harvests that are of poor quality and with weeds, the stocked seeds will often not even sprout. Seed certification, quality control, and review of breeds are all essential for a rich harvest.

The Seed Market and Legislation component of RESCAD has provided the necessary furniture and equipment to the Seed Agency (a state non-profit organization created in 2005), sent staff abroad for training, and founded seed labs in five regions of Armenia. The combined efforts of the Seed Agency, along with the Gyumri Selection Center, the Agriculture and Plant Protection Scientific Center, and the private sector have boosted local seed production.

As a result, farms can purchase local wheat seed at a price that is up to 30 percent lower than the price of imported seeds, stimulating the rural communities to grow wheat. In fact, 12,000 tons of local high-quality grain seeds were produced last year alone. However, Armenia's demand is five times as much. If the production of new varieties continues to grow, the Government intends to achieve 75 percent domestic self-sufficiency of wheat by 2012.