Enhancing the Policy and Business Development Capacity of the FAA and its Member FOs Problem Statement

Agriculture is vital for most countries in the world. Its role is more accentuated in the bad state of economy. Moreover, developing nations predominantly depend on agriculture to satisfy their food demands, food security, and employment in rural areas (UN System network on rural development and food security). 
Armenia, being an in-transition nation, greatly depends on agriculture. The share of agriculture in the GDP for the last 5 years (2005-2009) averaged about 17.5% (S. Avetisyan, 2010).  About 46% of employment in Armenia and about 60% of income in rural areas was due to the agricultural sector for the past 5 years. The local demand for plants, potatoes, main fruits, grapes, and veal is 98% satisfied by the local production, whereas the self-sufficiency level is quite low for wheat (40%), other grains (50-55%), poultry (15-17%), and pork (50-55%). Hence, it should be mentioned that all these just point to a single thing that agriculture is critical for Armenia. Specifically, improving agriculture could lead to poverty reduction, food security, increase in quality of life especially in rural areas, stability, and strategic improvement of the other sectors (ICARE Country Report, 2010). 

The obvious importance of the sector alone is not enough to bring about necessary changes. In fact, the attention to agriculture in Armenia is lacking by nearly all the stakeholders. The land quality and availability, necessary assets and financial resources, credit terms and availability, availability of water for irrigation, size of farms, natural disasters, and effective production, market, and social infrastructure are all problems that have dreadful impact on the sector along with the lack of support from appropriate institutions. 

Specifically, the problems currently facing agriculture in Armenia include:
1.	Low level of agricultural production intensification
2.	Low level of cooperative movement
3.	Limited financial resources of the farmers and others engaged in agriculture
4.	Inefficient seed production system
5.	Lack of agricultural product insurance system
6.	Inefficient credit organizations and insufficient credit for farmers
7.	Great dependence on the imported goods such as fertilizers, agricultural machinery, etc
8.	Low level of automation in the sector (i.e. more labor-intensive)
9.	Insufficient input supply and services
10.	Reduction of private remittances to farmers from abroad which were used not only for the families’ immediate needs, but also for purchasing fertilizers and seeds 
11.	Reduction of exports which directly affects the agricultural input procurement process.
The more horrific situation, however, is observed post-crisis period. The rural community is hit hard and overall agricultural sector is in alarming state. The agricultural gross production decreased by 5.1% in the first quarter of 2009 (relative to 2008 first quarter). For the same time period, economic loss in processing industry is about 5.7%, where the production of cognac and canned food nearly halved. Moreover, the ratio of agricultural food imports to exports increased to 5.9/1 in the first four month of 2009 (the ratios for 2007 and 2008 are 2.6/1 and 3.6/1, respectively). In other words, exports of agricultural food products declined by about 45% in 2009 (first four months) relative to 2008. The level of imports of agricultural food products did not decrease greatly (5.3%), but the fact that it decreased already indicates reduced purchasing power of population (ICARE Country Report, 2010). 

This situation continued in 2010 as terrible weather conditions joined to the financial crisis circumstances and the agriculture registered another 14.5% decline. In March severe frost and later unending rains created serious problems for rural households. About 70% of the fruits were affected by the severe frost. In wheat fields many diseases appeared which caused to about 20% decline of the wheat harvest. 

Probably one of the most important achievements can be considered the adoption of the “2010-2020 Sustainable Strategy Program for Agricultural and Rural Development” by the Government of Armenia and the Ministry of Agriculture which is aimed at the restoration of the financial crisis circumstances and through formulation of anti-crisis mechanisms contribute to the modernization of the agri-food system and raise its competitiveness.


The Role of Farmer Organizations and Cooperatives in the 2010-2020 Strategy Program 

It’s worth mentioning that nearly for the first time Ministry of Agriculture seriously highlighted the importance of farmer organizations and cooperatives in several components of the Strategy Program. The second sub goal of the Program notes that program should develop agricultural and intersectoral cooperation which will deepen the agrarian reforms. In particular, the Program highlights several directions that will promote different forms of agricultural cooperation. These directions are 1) improvement of legislation and creation of favourable conditions for the agricultural cooperatives, 2) create mechanisms of state support to agricultural cooperatives, 3) fixing the cooperative development idea in the context of rural farm consolidation policy, 4) support to milk collection units and consumer cooperatives, 5) support cooperatives in the whole food supply chain, 6) establish logistics and consolidation centers within the agricultural cooperatives, 7) support ag cooperatives to adopt food safety standards, 8) establish mechanisms for agricultural cooperatives to increase the access to rural credit, to have interest rate subsidies, collateral guarantees, etc.  

It is also important to mention that first 4 actions of the Program are related to development of agricultural cooperative forms and mechanisms as well as establishment of favourable conditions for coop functioning, improvement of legislation and development of missing legal acts needed for realization of the goals of the Program. 

The Federation of Agricultural Associations is proud to declare its serious role and success stories that motivated government officials and other stakeholders to take the needed directions in the Program. In particular, the efforts and the lobbying activities that FAA conducted in the Public Council attached to the President of RA, the visit of the RA Prime Minister to FAA member “Lukashin” cooperative organized by the FAA, FAA’s active participation in the discussion of the legislative acts and policy papers eventually gave results which was fully highlighted in the “2010-2020 Sustainable Strategy Program for Agricultural and Rural Development”.


FAA and Agriterra

Most of the lobbing actions and success stories of the FAA were possible due to the strategic support of Agriterra working with Federation of Agricultural Associations since 2008. Two FAA projects that were supported by Agriterra were aimed at enhancing the organizational and technical capacity of the FAA and its Member Farmer Organizations. Specific accomplishments that the FAA achieved are the following:

•	Member FO accountants are equipped with accounting software and financial management techniques.
•	The FAA member farmers are better informed in effective cooperative management, and they can now apply more effective cooperative management practices and make decisions in the sphere of cooperative management.
•	New cooperatives are established and ongoing consultancy is given them in fields of accounting and legal legislation for making easier the FAA joining procedures.  
•	The soil testing laboratory is equipped and operational
•	The FAA member farmers are receiving “AgrInfo” and local agricultural newspaper “Agrolratu”, which will contribute to staying informed about latest news and innovations in agricultural sphere.
•	The FAA staff participated in training course on conducting effective lobbying actions. 
•	Member women farmers are now very happy to see that the FAA Women Committee has created a newsletter especially for Women Farmers and that the World Rural Women Day was celebrated in Armenia on October 15. 
•	The number and the structure of WIGs are becoming more consistent, which creates more solidarity among its members, becoming more self-confident and encouraged for starting something on their own or with little outside support. 
   
Although all mechanisms have been created by FAA to support its member farmers’ organizations, there are both internal and external obstacles that FAA faces in achieving its mission and objectives. The most important internal obstacles are related to organizational, managerial and financial weaknesses. FAA is still much dependant on outside funding. Lack of resources hampers employing professional staff: there is an outflow of staff members. FAA is still not able to fulfil demand of members because of the lack of financial resources, which itself has its negative impact on membership numbers. The loan portfolio is not growing and in the post-crisis period is much harder to attract other financing. The demand for loan is much higher than supply. Some FAA member farmer organizations are till lacking social responsibility and cooperative thinking. FAA member cooperatives also lack of business development skills and financial management. Farmers are hesitant to adopt and use improved inputs, farming techniques and farm management methods. Local member farmer organizations either don’t have or have weak linkages with market players. Member farmers are very poor and can’t afford additional services as well as are not able to pay for extension and farm consultants.  

External obstacles are related to the poor government policies (economic, agricultural, rural, fiscal, etc) and legal frameworks for empowering farmer organizations. Government policies do not facilitate the development of farmers and their organizations. Farmers argue that political and legal environment is not conducive to the development of agricultural sector in general. With the adoption of the “2010-2020 Sustainable Strategy Program for Agricultural and Rural Development” there are hopes that the Government will eventually take some serious actions towards sustainable development of agriculture. As the FAA had an important role in promoting in the Program the concept of developing agriculture and related fields via formulating strong farmer organizations and cooperatives, it is therefore very important that FAA and its associated Farmer Organisations improve their representation functions to important government agencies as well as undertake regular appropriate lobbying actions and consultative meetings at different government committees. 

Suggested Proposal Concept

The concept of the proposed project is to develop FAA towards becoming more viable and sustainable organization through enhancing the policy and business development capacity of FAA and its member farmers’ organizations in terms of 1) strengthening the policy elaboration and lobbying capacity of the FAA and member FOs and 2) strengthening the business development and entrepreneural capacities of member FOs.

These areas are in line with Agricord FFP Round 2 program priorities, in particular Work area 3: Policy elaboration and advocacy and Work area 4: Business Development as well as Agriterra’s three thematic areas a) farmer led agri-business, b) grassroots economic initiatives, c) specific lobby and advocacy.
Goals of the Project
a.	Strengthening FAA’s business activities via proper business planning to enhance the business development capacity of the FAA and its member FOs.
b.	Strengthening the policy elaboration and lobbying skills of FAA to better voice the interests of Armenian farmers at national and international levels.
c.	Developing institutional partnerships and appropriate linkages with private sector for efficient market access.
d.	Developing skills of the members FOs in the area of rural enterprise development, modern farm management practices and financial literacy.

Objectives of the Project

This project is going to reach the fulfilment of its goals through the following objectives.

a.	To develop a relevant business plan for the FAA with the help of external consultant. The business plan should target the following business activities of FAA: Rural Credit, Farm Stores and Input Supply, Consolidation and Logistics Center and Training Research and Consulting. FAA member farmer organizations should play an active role in FAA business plan development.

b.	To strengthen policy elaboration and lobbying skills of FAA. FAA should actively conduct consultative meetings with farmers and government officials on specific policy issues highlighted in the “2010-2020 Sustainable Strategy Program for Agricultural and Rural Development”. FAA leaders are involved in various NGO committees and groups to deal with the RA Parliament. In this process the FAA should gain more skills in lobbying techniques for more efficient lobbying and policy elaboration. Invited experts would help FAA review laws and different legal acts important for Armenian farmers, develop lobbying strategy, organize roundtables, etc.

c.	To establish and facilitate proper market linkages and promote business activities for its member FOs. To facilitate such linkages first of all appropriate value chain analysis is needed for selected key products that FAA member farmers are mostly specialised on. FAA will work on establishing business partnerships with fresh fruits and vegetable exporters, supermarket chains and processing companies. In such partnerships sustainable contracting mechanisms should be elaborated.

d.	To train FO staff and members in rural enterprise development, financial literacy and modern farm management practices. These skills are needed to improve the productiveness of the farmers, apply modern farming techniques and establish new rural businesses in their communities. There are several modern farming techniques, e.g. zero tillage, organic agriculture, laser levelling, using water saving innovative technologies, etc. which increases the yields, reduces about 35% of the farm expenses and significantly increased incomes of the farmers. FAA will work on establishing Farmer Field Schools in selected member FOs where members will participate in offered trainings and field work.

Logframe – Goals, Objectives, Actions, Measurable Targets and Means of Verifications


Goal 1. Strengthening FAA’s business activities via proper business planning to enhance the business development capacity of the FAA and its member FOs.

Objective a) To develop a relevant business plan for the FAA with the help of external consultant.

Objective b) To actively involve FAA member FOs in business plan development.

Action 1. FAA will request Agriterra to recruit an external expert/consultant to help FAA in developing a relevant business plan.

Action 2. FAA will facilitate the whole process of business plan development with active participation of member FOs.
	
Measurable Targets: FAA has a relevant business plan and established targets for Rural Credit, Farm Stores and Input Supply, Consolidation and Logistics Center and Training Research and Consulting.

Means of Verifications:	Business Plan in place.


Goal 2. Strengthening the policy elaboration and lobbying skills of FAA to better voice the interests of Armenian farmers at national and international levels.
	
Objective a) To develop specific proposals in line with the “2010-2020 Sustainable Strategy Program for Agricultural and Rural Development”.

Objective b) To invite experts for reviewing laws and different legal acts important for Armenian farmers and develop lobbying strategy.

Objective c) To publish a guidebook on How to Form Agricultural Cooperatives in Armenian and distribute.

Action 1. FAA will conduct regular consultative meetings with farmers, academia, consultants and government officials on specific policy issues highlighted in the “2010-2020 Sustainable Strategy Program for Agricultural and Rural Development”

Action 2. FAA will invite speakers, experts, lawyers to review developed proposals and policy papers for lobbying purposes.

Action 3. FAA will publish a guidebook.

Measurable Targets:	Specific policy proposals in line with the “2010-2020 Sustainable Strategy Program for Agricultural and Rural Development” are developed representing the interests of farmer organizations and FAA. FAA represented member farmers in policy dialogue on agricultural issues with government and other organizations. Guidebook is publish and presented to those who interested in cooperative movement.

Means of Verification: Specific policy proposals in place. Number of proposals integrated in government strategy documents. Articles published in local newspapers highlighting the FAA’s position on specific policy issues. Guidebook is published and distributed.


Goal 3. Developing institutional partnerships and appropriate linkages with private sector for efficient market access.
	
Objective a) To establish and facilitate proper market linkages.

Objective b) To promote business activities for its member FOs.

Objective c) To conduct value-chain analysis for FO key products.

Action 1. FAA will work on establishing business partnerships with fresh fruits and vegetable exporters, supermarket chains and processing companies.

Action 2. FAA will support to business development activities by its member FOs, like cold storages, collection centers, etc.

Action 3. FAA will conduct 4 value-chain analyses for the following key products: grape, apricot, tomatoes and greenhouse vegetables.

Measurable Targets: FAA facilitated efficient market linkages with market players. Specific business project proposals envisaged by FAA member FOs are developed and submitted to donors or banks. FAA conducted value-chain analysis for FO key products aimed at securing better bargaining position in the market.

Means of Verification: Contracts/agreements in place. Specific business project proposals in place. Value-chain analysis are available.


Goal 4. Developing skills of the members FOs in the area of rural enterprise develop-ment, modern farm management practices and financial literacy.
	
Objective a) To improve the productiveness of the farmers by applying modern farming techniques and farm management practices.

Objective b) To contribute to the rural enterprise development by its member farmers.

Objective c) To establish Farmer Field Schools in selected FOs.	

Action 1. FAA will develop training materials and conduct trainings in rural enterprise development, modern farm management practices and financial literacy.

Action 2. FAA will establish 3 Farmer Field Schools in selected Cooperatives.

Measurable Targets: Members are trained and apply modern farming techniques. Members are trained in financial literacy. Farm expenses are reduced by about 30%. Members participate in the Farmer Field Schools. Members are satisfied by FAA training services.

Means of Verification: Training records. FO reports, Farm accounting papers. Member survey, % of satisfied.

Défense des intérêts des pastoralistes en Afrique de l'Ouest à travers une plus grande influence des politiques