LOCAL ECONOMIC DEVELOPMENT

Transcription

1 LOCAL ECONOMIC DEVELOPMENT The publication was made possible with the the help of the American people through the support provided by the United States Agency for international Development (USAID). The opinions (or you may say statements and analysis) contained herein are those of the author and do not necessarily reflect the views of the U.S. Government or the USAID. PARTICIPATORY APPRAISAL OF COMPETITIVE ADVANTAGE (PACA) ZORAKAN AND HAGHTANAK COMMUNITIES 1 TAVUSH, 2014

2 Content Analysis Performing Agency... 2 Communities... 4 Information About the Communities... 4 Competitive Advantages of the Communities... 5 Analysis of the Sectors of Economy... 6 Horticulture... 7 Main Indicators of Horticulture and Profitability Calculation... 7 Comparative Advantages of Horticulture Fruit Processing Horticulture: Continuous Processing of the Crops Value Chain in the Communities Description and Interventions of Individual Phases of Horticulture Value Chain Crop Cultivation Possible Interventions in Husbandry Cattle Farming Women s Involvement in Value Chain Summary of Initiatives Analysis Performing Agency Geghakunik Chamber of Commerce and Industry (GCCI) 2

3 In the communities of Zorakan and Haghtanak local economic development process started in February 2014 within the framework of the Partnership for Rural Prosperity (PRP) Program together with the funding provided by the USAID. The main competitive advantages within the communities were revealed and leading economy branches were determined, based on which initiatives were offered crucially important for the economic development The process involves the following stages: Presentation of the activity, introduction, and formation of the local team Economic mapping of the communities separation of the leading sectors, determination of leading actors within the sectors Analysis of the existing value chain, revelation of reform initiatives Manufactories aimed at analyzing the leading sectors Conclusion of results, formulation of initiatives Finalization of initiatives, refinement of the booklet Presentation of the obtained results and initiatives to the community active stakeholders 3

4 Communities Zorakan and Haghtanak communities are located adjacent to one another by the north-eastern border of Armenia, 4 km away from the Georgian border. While being distinct from one another, these communities have deeply integrated sectors of economy, firm ties and developed cooperation. The inhabitants of the communities are mainly preoccupied with horticulture, land cultivation and, to some extent, cattle farming. The communities are located on the altitude of 600 m above the sea level. Information About the Communities Zorakan Haghtanak Population Households Arable land of which irrigated are Planted crops (ha) Orchards Bovine cattle of which cows are Small cattle Domestic birds Combine harvesters 1 1 Tractors Cargo trucks 4 6 4

5 Competitive Advantages of the Communities Below are presented the competitive advantages of the communities economies. The basis of competitive advantage is the economic power of the communities compared with neighboring communities, as well as all other communities in Armenia. Favorable sub-tropical climate, mild winter Located on the altitude of only 600 m above the sea level, these communities have a sub-tropical climate ensuring favorable conditions for horticulture. Shortest harvest ripening period Harvest ripens days earlier compared with other regions of Armenia. This allows entering the market in the first place and selling the harvest at high prices. Proximity of the Yerevan-Tbilisi highway The proximity of the highway allows selling part of the harvest at a relatively high price by the side of the road. Quick replication of successful practices People are open to innovation and replication of successful practices, which allows carrying out the most efficient activities rapidly. 5

6 Analysis of the Sectors of Economy The analysis of the key sectors of economy considered the concentration of main labor force and the source of the population's primary income. The assessment focused on factors, including the development of these sectors, value chains, accessibility of supporting sectors, accessibility of the necessary infrastructure, and the quality demand within the existing sector. Attention was paid to the profitability of the sectors as compared with indicators of other branches and communities (in some cases compared with average indicators in the regions and the overall country). The experts and local team have jointly separated the primary branches of the communities' economic development based on local competitive advantage. Strategic Branches Horticulture and further processing Sub-tropical climate, short harvest ripening period and mild winter create favorable conditions for the development of horticulture. Here are grown not only traditionally cultivated fruits but also new sorts, such as persimmon and tropical fruits, which are impossible to grow in other regions of Armenia. Sunflower production Thanks to its cultivation, simplicity and high profitability compared with grain, the sunflower cultivation has become the source of income for a considerable number of communers. The sphere of sunflower cultivation development has been fostered by the availability of Bagratashen community roasters, which consume the entire harvest. Onion cultivation Recently, onion cultivation has been developing in the community. Thanks to favorable growing conditions and existing demand, onion growing may rapidly spread and become one of the leading sectors of land cultivation. 6

7 Horticulture Horticulture is of fundamental importance for the two communities. In both communities, where irrigation water is available, fruitful orchards are mainly located, as they are feasible thanks to high profitability and favorable weather and climate conditions compared with crop cultivation. At the same time, if in crop cultivation the main harvest consuming market is the market of Armenia, then the Armenian fruit, thanks to high taste attributes, is also demanded abroad: Russia, in particular, while, the processed fruit is also demanded in some European countries. In both communities the transition from crop cultivation to horticulture is noticeable. The transition is stable, though not abrupt, which is conditioned by the slow return to investments into horticulture (newly planted orchards require five and more years for producing harvest), and by the complications with irrigation water supply. The development of horticulture is hampered by the absence of defensive equipment against hail and frost, as it poses serious risks. Main Indicators of Horticulture and Profitability Calculation In the communities, 90% of households are involved in horticulture. Նրանց մեծ մասն իրենց տնամերձ հողամասերում ունեն այգիներ: Most of these households incorporate orchards within their plots. Beyond the homesteads, about 100 farmings are preoccupied with horticulture, of which: 11 farmings with orchards covering 5 and more ha 23 farmings with orchards covering 1 5 ha 66 farmings with orchards covering less than 1 ha Below are presented the sorts and volumes of the fruit grown in the communities. 7

8 Peach ha Persimmon - 59 ha Cornelian cherry - 58 ha Apricot - 10 ha Apple - 10 ha Pomegranate - 6 ha Hazelnut - 5 ha Fig - 3 ha Other - 3 ha Traditional peach is grown in half of the orchards. Compared with other fruit, peach growing is more complex and expensive. At the same time, peach is hard to preserve; as a result, harvest loss is increasing because a quick sale of the harvest quickly is impossible. If 1 ha covering orchard provides minimal fertility of 10t, then the annual minimal productivity of the two communities is 154 ha x 10 t = 1540 t of peach. 10% of the harvest is sold at the Armenia-Georgia highway, where about 50 selling spots are located. 20% of the harvest is sold to re-sellers; 10 12% is delivered to large processing entrepreneurships (mainly to the Ayrum cannery factory). About 20% of the harvest is used for producing vodka in domestic conditions. While another % is used is spoiled and partially is used as forage. 8

9 AMD 150 t of peach is sold by the road 1540 t of peach 300 t of peach is sold to re-sellers t of peach is sold to processing entities 300 t of peach is used for vodka AMD AMD About 500 t of peach is spoiled annually In contrast to peach, the processing of persimmon and cornelian cherry is significantly profitable; as a result, traditional peach is giving away its position to these sorts of fruit. Persimmon and cornelian cherry are easier to process, are less costly and are easier to sell. Persimmon is greatly demanded by cold storages-owning processing entities, which purchase the harvest, keep it for two months and sell it in December. Persimmon is also demanded by the fruit drying entities of the sub-region. Cornelian cherry, is also in great demand by both processing and re-selling entities, which mainly purchase the entire available harvest and export it to Russia. In the communities other varieties of fruit are mainly cultivated in small numbers and are grown in homesteads; consequently, there is no problem with sales. The harvest is mainly sold by the roadway and to re-sellers. 9

10 Comparative Advantages of Horticulture 1 1 Fruit name Peach Apple Persimmon 2 Average harvest collected from 1 ha area 2, kg Average wholesale price for 1 kg (2013), AMD Income received from 1 ha harvest ('2'x'3'), AMD 5 Direct costs completed, AMD Income minus direct costs, AMD Volume of work per number of man/days per ha 8 Producibility, AMD Fruit Processing In the communities, fruit processing and preservation is almost absent. In the communities there is one cold storage and one fruit drying facilities, which are mainly used for the preservation and processing of some part of personal harvests. 1 In horticulture, fruit growing within 1 ha area, the resulted income from the collected harvest and the volume of work spent for growing the harvest is used as a conventional unit for productivity calculations. 2 Although the peach productivity can reach 25 t, considering the difficulties of its sales, the horticulturists don not treat the peach trees well, which results in fertility and quality decline. 10

11 Horticulture: Continuous Processing of the Crops Value Chain in the Communities Growing Road Fresh fruit sales Re-seller Cultivation, sorting Orchard extension Cold storage Vodka Processing entity Sales 11

12 Description and Interventions of Individual Phases of Horticulture Value Chain 1 Fruit growing, sorting, orchard extension In horticulture, the first stage is fruit-growing. Below are presented the weak points and potential options for intervention within the circle. Weak spots Scarcity of irrigated land plots Unpreparedness for hard weather conditions Difficulty of purchasing fertilizers, chemicals, seedlings and high quality materials Lack of knowledge regarding modern means of promoting cultivation Absence of high quality agricultural services In the communities there are almost no early-ripening sorts, the existence of which will provide the opportunity to sell the harvest at higher prices Possible interventions Addition of irrigated land plots Establishment of anti-hail stations Establishment of horticultural resource center for sub-region Growing of earlyripening sorts Actions, propositions Establishment of an alternative water pipeline providing irrigation water to homesteads in Zorakan community Assistance in establishing two anti-hail stations in Zorakan community. These stations will allow to defend orchards covering an area of 200 ha. Creation of a horticulture resource center, which will: provide professional consulting provide guaranteed pesticides, fertilizers, seeds and instruments provide new and productive seedlings The same initiative is proposed for four villages of the Bagratashen sub-region: Bagratashen, Debedavan, Deghdzavan and Ptghavan. A horticultural resource-center can play a leading role in the above mentioned four villages, as well as in other adjacent villages. Assistance in importing early-ripening sorts 12

13 2 Fruit growing, packaging Weak spots Possible interventions Actions, propositions Absence of processing entities, as a result of which fruit processing is not carried out within the communities Fruit dryers Small cold storages Vodka and wine producing small entities Small manufactories for packing, processing, jam and confitures Only one fruit dryer is operational; there is a need for establishing new fruit dryers, and provide technical and technological upgrade of the existing one. Only one cold storage is operational; there is a need for establishing new ones. There is a need for training for horticulturists for producing vodka in domestic conditions, as well as looking for opportunities of introduction of a business model in this field. There is a need to establish small permanent fruit and berry processing manufactories. 3 Sales Weak spots Possible interventions Actions, propositions Along the Armenia-Georgia highway, there are about 50 operating self-made pavilions where the harvest is sold Assistance in building pavilions Assistance in establishing agricultural market Assistance in purchasing refrigerator machines Pavilions are self-built; there is a need to build modern type pavilions. Establishment of agricultural market will allow to increase the efficiency of the along the side of road. Availability of refrigerator machines will allow the inhabitants of the communities to sell a part of the harvest in other marzez of Armenia, as well as to consider export opportunities. 13

14 Crop Cultivation In parallel to horticulture, crop cultivation is also developed in the communities. In contrast to horticulture, in crop cultivation it is possible to gain income just in several months, as well as use of land plots that are non-irrigated and/or having problems with irrigation. Mainly the following crops are grown: wheat 330 ha barley 210 ha sunflower 140 ha other crops (tobacco, corn, onion, garlic, and others) Below is presented the profitability of the main crops per one hectare. Wheat Barley Sunflower Onion 1 Average harvest collected from 1 ha area, kg Average wholesale price per kg (2013), AMD Income received from 1 ha harvest ('1'x'2') Expenses made per 1 ha Profit As it is seen in the table above, the least profit is gained from wheat and barley cultivation. At the same time, in the communities about 540 ha of wheat and barley are cultivated, which is conditioned by the simplicity of the cultivation (the involvement of people in the activity throughout the year does not exceed 10 days) and the possibility of using of non-irrigated lands. Wheat and barley are not sown on irrigated lands because the cultivation of sunflower and establishment of orchards is utmost productive. 14

15 In contrast to grain, sunflower provides about 7 8 times greater profitability. In the considerable part of the irrigated land plots sunflower is grown. The sunflower growing is also assisted by the Bagratshen community roastery, which mostly consumes the entire harvest at the price of AMD, depending on the harvest quality. Throughout the last two years attempt is made to grow new crops: onion and garlic. Onion ensures about AMD profit from 1 ha area. This is 4 times greater than in the case of sunflower, as a result of which, onion can be spread rapidly and thus, become one of the most cultivated crops in the communities. Here we are talking about crop cultivation in non-irrigated land plots. In irrigated land plots onion may have twice greater fertility and in the near future a partial replacement of sunflower with onion will take place. In the communities the establishment of greenhouses may result in the increase of efficiency, which will allow to grow vegetables and greens during winter period, when the demand increases. Mild winter will allow to compete with greenhouse-equipped such regions as Ararat valley and Vayots Dzor. An attempt to establish greenhouses is already made in the neighboring Ptghavan community, where 17 greenhouses were established with the assistance of SMEDNC Armenia, UN Support to SME Development in Armenia program and GCCI. 15

16 Possible Interventions in Husbandry Improvement possibilities Possible interventions Actions, propositions Difficulties with acquisition of high quality seeds Provision of new seeds Assistance in purchasing sunflower, grain and onion high quality seeds The employed agricultural machinery is outdated and small in numbers. Horticulturists cannot till the land on time, high demand brings to unreasonable price increase There is an absence of an exact seeding machine, as a result of which onion, garlic and corn seeding turns into an expensive and complex process Assistance in acquisition of tractors Assistance in acquisition of an exact seeding machines Possible information assistance to farmers and tractor operators regarding upgrading of agricultural machinery Assistance in acquisition and importing of equipment in case of existent interested farmers/tractor operators Provision of information regarding onion growing technologies 16

17 Cattle Farming Cattle farming partially developed here. In the communities there are 766 bovine cattle, of which 421 are cows. The number of small cattle is 472. Cattle farming is inferior to horticulture and crop cultivation in terms of profitability, as a result at the basis of cattle farming mainly lies the fulfilment of private needs and the availability of forage and the unsold fruit. 1 Cattle kind Pig Cows Well-fed calves 2 Optimal farming 3 30 two months-old piglets 3 Resulting output per unit 40 kg of meat per six months-old pig 10 cows 10 calves 2000 l of milk 1 calf 4 Overall result 1200 kg of meat l of milk 200 kg of meat in two years 2000 kg of meat 5 Wholesale price per unit 2500 AMD per 1 kg of pork meat 10 calves 130 AMD per one l of milk AMD per calf 2000 AMD per kg of meat 6 Resulting income Necessary expenditures Profit Cattle farms specializing in meat production are quite effective in the communities, since they ensure greater profit. At the same time, during the June-July period, when the meat is offered for sale in the communities, cattle farming entities do not yet offer meat for sales in the market; this ensures a rapid sale of the meat in the communities. 17

18 Women s Involvement in Value Chain In horticulture, women are mainly involved during harvest collection, where about 130 women and girls participate. Women are also involved in homestead tillage. More than 300 women participate in the tillage of their private homesteads and land plots. In crop cultivation, women are mainly involved in sunflower harvest collecting and harvest warehousing activities as hired workers. Another 150 women are involved in harvest warehousing activities. Another 42 women are involved in cattle farming: mainly in milking, dairy production in domestic conditions and cattle care activities. Of the 36 women involved in the field of trade, 22 sell their product along the street. Women involved in value chain Hired Private Horticulture Crop cultivation Cattle farming Trade 18

19 Summary of Initiatives Horticulture Addition of irrigated land plots. Construction of alternative water pipelines for providing homesteads in Zorakan community with irrigation water. Establishment of a horticultural resource-center for the sub-region. Assistance in establishing two anti-hail stations in the Haghtanak community. The stations will allow protecting orchards covering about 200 ha area. Assistance in establishing fruit processing entities: o Fruit dryers, cold storages, vodka production, juice and confiture production Assistance in building pavilions Assistance in building agricultural market Assistance in acquiring refrigerating machines Growing early-ripening sorts Crop cultivation Assistance in acquiring sunflower, grain and onion high quality seeds Provision of information to farmers and tractor operators regarding possible agricultural machinery upgrading Assistance to interested farmers/tractor operators in acquiring and importing exact seeding machines Assistance in establishing greenhouses 19

20 We express our gratitude to the municipalities of the Zorakan and Haghtanak communities, in particular, community leaders and members of the local team for assistance in implementing the Program. 20