cover image: Sustainable, inclusive agriculture sector growth in Armenia : lessons from recent experience of growth and contraction - background report for World Bank systematic country diagnostic

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Sustainable, inclusive agriculture sector growth in Armenia : lessons from recent experience of growth and contraction - background report for World Bank systematic country diagnostic

27 Mar 2018

Agriculture is an important sector in the Armenian economy, with a contribution of 20 percent of the GDP, 35 percent of the employment, about a third of the total export in 2015. Small-scale, semi-subsistence farms predominate the sector, with 80 percent of the farms having less than 2 ha of land. Only 1 percent of farms have more than 10 ha, and these farms account for 15 percent of agricultural land use. Irrigated land accounts for 30 and 45 percent of the total agricultural land and value of crop production, respectively. Agriculture has recorded strong growth during 2004-2015. It grew by 83 percent and accounted for a quarter of the 70 percent growth in the overall economy during this period. This growth has been driven largely by increased productivity of semi-subsistence farms through increased fertilizer and improved seed use. The growth has largely been inclusive of small scale farmers. Agricultural export more than quadrupled between 2004 and 2015. Yet, most of these exports (70 percent of the total agricultural export) come from the export of beverages and tobacco products, which do not draw significantly on Armenia’s agricultural resource base. Agriculture has experienced improvements in access to credit, Foreign Direct Investment (FDI), and Government budget support during this period. Sector access to capital improved, both through commercial bank lending for agriculture and FDI in primary production and agro-processing. The agriculture budget increased modestly (4 percent) during 2012-2015. Yet, the budget support is not well targeted with a third of the total budget expenditure allocated to subsidies at the expense of essential public services that account for less than 2 percent of the budget support. The overall agricultural employment has declined by 18 percent while women employment increased by just 1 percent (men employment fell by 33 percent) between 2004 and 2015. Higher agricultural productivity and prices, as well as the fall in labor supply, contributed to higher agricultural wages, which increased by 126 percent from 2004-2015. Yet, agricultural wages remained at 65-70 percent of non-agricultural wages. The sector has been largely resilient against frequent shocks during the last decade. Factors that contributed to the resilience of the sector to shocks include its semi-subsistence nature, diverse farming systems, adoption of drought tolerant crops, and strong and stable base of public transfer systems. This study provides four hypotheses that can be used as bases to review the contribution of the agriculture sector to sustainable and inclusive growth in Armenia. These are: i) a new model, which focuses on medium-scale farms and commercialized farming, for agriculture sector growth; ii) a vibrant private sector driven by medium-scale farms and agri-business enterprises; iii) investment in knowledge transfer for farmers and agri-business and improved education and training for rural people; and iv) resilience in a modernized agriculture sector.
inclusive growth agriculture armenia private investment rural area inequality agricultural sector soil quality crop production europe and central asia agricultural extension agricultural land agricultural machinery agricultural production agricultural productivity collective farming construction industry consumer price index economies of scale farm income farm size food processing hydrology labour productivity land market public services water resources women in agriculture raw material arable land farmer farming system alcoholic beverage land productivity farm household root crop female employment export growth export market agriculture and food security small farmer global financial crisis investment in knowledge domestic demand budget support economic expansion public spending farm structure absolute poverty business enterprise economically active population commodity group public pension wage earnings subsidy programs primary production tobacco product commercial agriculture quality of water agriculture sector population centre livestock productivity intensive agriculture impact of climate change government subsidy climate change and agriculture market liberalization livestock and animal husbandry adverse social impact household level poor household financial resource source income water management system source of income modern technology agricultural land use budget increase rural woman economic shock agricultural commodity summer temperature increase productivity exogenous shock donor support fixed capital formation crops and crop management systems export crop ministries of health government support program management systems production base small scale farmer public support irrigation infrastructure agricultural labor livestock feed improved seed livestock production system crop and livestock institutional base access to health investments in agriculture climatic shocks lack of resource national statistical private sector activity agricultural growth access to capital irrigated area employment in agriculture official statistic farm land agricultural employment employee account comparator country constant price sprinkler irrigation point of departure exchange rate risk gender composition severe drought government investment institutional infrastructure improvements in access high value crops cereal crop urban poverty reduction cold winter hot summer firm productivity vocational training program geographical location average yield rural household income response to climate change education and training system agricultural wage cereal production lack of water external condition construction sector equity contribution small farm annual crop poverty increase public water supply farmers uses rising demand public transfer modern management perennial crop produce food agricultural resource base fresh fruit and vegetable crop land supply of labor crop yield increase modern agriculture real growth access to irrigation cash income cultivable land global economic slowdown cost of water nominal price area under irrigation demographic trend average precipitation demand for credit livestock number direct subsidies direct subsidy senior agricultural specialist agricultural import flat land high water losses low cost technology area under cultivation permanent pasture average farm size nominal income constraints to development commercial bank lending farm employment opportunities extreme conditions impact of migration mountain area egg production unskilled work modest increase livestock commodities labor productivity increase donor investment livestock consumption demand for irrigation interest subsidy natural population increase winter temperature water use fee effective knowledge transfer land privatization drought tolerant crops fertiliser use increasing wage annual budget expenditure wine grape intensive cropping producer price increase medium scale farm observed growth medium term program small herd corporate enterprise

Authors

Christensen,Garry N.

Disclosure Status
Disclosed
Doc Name
Sustainable, inclusive agriculture sector growth in Armenia : lessons from recent experience of growth and contraction - background report for World Bank systematic country diagnostic
Document Date
2017-05-01
Published in
United States of America
Rel Proj ID
AM-Armenia Systematic Country Diagnostic -- P162052
Total Volume(s)
1
Unit Owning
South Caucasus Country Unit (ECCSC)
Version Type
Final
Volume No
1

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