Ambassador Kirakossian's Presentation at the Land Privatization Workshop
William R.Nelson Institute for Public Affairs of James Madison University and Citizen Network for Foreign Affairs

June 20, 2002

It's a pleasure to speak today at this forum, and I want to thank the William Nelson Institute and the Citizen Network for organizing it. I would also like to thank my former colleague, Ambassador Ceslav Ciobanu for his efforts to bring about an important discussion on the privatization of land and agricultural reforms in the NIS.

First, here are some facts about the Republic of Armenia. Armenia is a mountainous landlocked country with an area of 29,800 square kilometres (12,000 square miles), with altitudes ranging from 400 to 4000m. Most of the country is located above the altitude of 1000 meters. The population of Armenia is nearly 3 million people, which makes the density of population 123 per 1 sq. km., and double that in urban and arable areas. Nearly 30% of the population lives in rural areas, and the agriculture accounts for 30% of the Armenian GDP. The number of private farms, agribusinesses and land plots is nearly 800,000.

In the view of the important role of agriculture in the social economic development of the Republic of Armenia and the significance of food security for Armenia, the economic reforms were initially implemented in the agrarian sector. The reforms are aimed at creating a stable and productive field, which is regulated by market economy forces.

The agrarian reforms in Armenia have been carried out since the Declaration of Independence in 1991. In the first stage of reforms (1991-1993) agricultural land, livestock and other production means were privatised, thus making Armenia the first among the NIS countries to completely privatise land. In the next stage of reforms (after 1994) enterprises and organisations of agricultural supplies and services in the sphere of agricultural production and marketing were privatised.

Due to the implementation of the reforms in the country some problems of vital importance were solved. All the rural people as well as some former farmers living in the urban areas and willing to be engaged in agricultural activities became landowners. During the last few years the reforms helped to produce and provide the consumer market with the necessary local products and to enlarge the assortment of products of great demand. The private enterprise has also resulted in greater self-sufficiency, and even exports of agricultural production.

While the privatisation of land, and private enterprise in the agriculture addressed many of the legacies of the Soviet period, some problems remain, including irrigation, insufficient credit financing opportunities for agribusiness, insufficient equipment, and underutilization of land. Some of it is caused by the small size of an average farm, between 1.5 and 2 acres. Marketing agricultural commodities, both domestically and abroad, is also a major challenge for many farmers.

At present, the Government policy in this sphere of agriculture is aimed at the effective use of existing potential, expansion of food processing opportunities, as well as, the organisation of agricultural services and supplies with the assistance of Government. The Government pays attention to the protection of the interests of the farms and other agricultural units. The Armenian Government facilitates the cooperation in the agricultural sector and the establishment of farmers associations.

Functioning of a free land markets is critical for ensuring a greater utilization of the scarce arable land in Armenia. The process of granting land titles - state certificates of land ownership rights will be completed soon, and new, more accurate methodologies of cadaster evaluation will be implemented soon. Special attention is paid to the increase of land utilisation efficiency, investment of credits from international organisations, operation of insurance systems in agriculture and the improvement of state lands.

In general, since 1994, the Armenian government and farmers have benefited enormously from bilateral and international financial assistance. USDA's Marketing Assistance Program in Armenia is enormously successful in addressing the above problems, as it fostered formation of farmers' associations, marketing groups, agricultural research and consulting services. The United States has an extensive experience in this field, and we are glad to have many USDA specialists in Armenia who will ultimately help the Armenian farmers to stand firmer on their feet. USAID was instrumental in land title program, like it did in other NIS countries.

With the help of our international donors, the Government of Armenia has started to implement a program for establishment of Agricultural Service Centers in every Armenian province, which will allow the farmers to make better and greater use of the agricultural equipment for their needs.

The natural and climatic conditions of Armenia make irrigation essential for the Armenian farmers. With the help of the World Bank and some bilateral donors such as the United States, the Government of Armenia plans to implement measures that will result in increasing effectiveness of irrigation system and to reduce irrigation water loss

To address the critical shortage of financing opportunities for the farms and agribusinesses, there are several micro-credit facilities, established by USDA and USAID programs, other international donors, as well as Agricultural Development Bank. Existence of Agricultural Information services and the Agricultural Academy will ensure that the Armenian farmers and agribusiness executives will have the tools of science, R&D, and modern technologies to utilize.

The reforms of the agricultural sector in Armenia and the government policies, coupled with the hard work and resiliency of the Armenian farmers have created a good basis for further development of agriculture. And now there are favorable conditions for investments in this sphere: the continuing economic reforms, existence of favorable investment legislation, low inflation, and stability of the Armenian currency.

As I mentioned before, the privatization of land resulted in greater volumes of agricultural production, some of which is now exported to markets in the Middle East, NIS, and the United States. For instance, Southern California is an important market for the Armenian products, and Armenia exports wine, brandy, dried fruits, dairy products, and cigarettes there. The Yerevan Brandy Factory, now owned by the French Pernot Ricard company, is constantly enlarging its products levels, and acquires 20,000 MT of grapes from the Armenian farmers. As the Armenian economy grows, so will the demand for the agricultural products.

Once again, I am delighted to take part in this discussion. In many ways, our countries inherited the same set of problems caused by the Soviet legacy. Each country approached the agricultural challenges differently, but I think we all have something to learn from one another. Armenia is ready to cooperate with all the neighboring countries in exchange of information and finding common marketing opportunities.