Local Economic DevelopmentinNoyemberyan

Participatory Appraisal ofCompetitive Advantages(PACA)

Noyemberyan, April- May, 2010
Table of Content

Implementing organizations

GTZ

Gegharkunik CCI

Noyemberyan

Brief description of Noyemberyan economy

Competitive advantages of Noyemberyan

Natural

Professional, human resources

Technology resources

Economic sector analysis of Noyemberyan

Productivity calculation of main economic sectors

Comparative advantages of gardening

Comparative advantages of cattle breeding

Promising economic sectors of Noyemberyan: Value chains

Recommendations

About the programme

Local team members

Programme expert team

Implementing organizations

GTZ

The objective of the “Municipal and Economic Development Program” of German Technical Cooperation (GTZ) in Armenia is the development promotion in municipal, economic and employment sectors. Acting on behalf of German Federal Ministry of Economic Cooperation and Development (BMZ), it is a linking chain between national, regional and local governing systems thatsupports the strengthening and efficient useof potential.

The programme has three components, which concern community and economicdevelopment as well as employment promotion.

From January 2010, the former ProSME(Promotion of small and medium-sized enterprises) project of GTZ was integrated into the “Municipal and Economic Development Program” as its third component. The objective of this component is the promotion of local economic development with emphasis on small and medium enterprises. Within the framework of this component, Business Service Providers are being counselled to improve and expand the services offered to the SMEs. The LED PACA is one of the main directions of the mentioned third component.

Gegharkunik CCI

Gegharkunik Chamber of Commerce and Industry is one of the leading Armenian organizations functioning in local economic development. By developing and identifying local economic development project models, GCCI contributes to the local economic development of regions as well asthe establishment and support of business communities.

GCCI’s main services are the elaboration of community development strategies, implementation support, business and strategic planning, business consultation andadvocacy.

Since 2009, GCCI is the member of Armenian Local Economic Development Consortium along with Middle East Foundation, USA Affiliate of “Hayastan” All Armenian Fund, “Business Pareta” Consultation centre and German Technical Cooperation.

Noyemberyan

Noyemberyan community is located inthe north of Tavush region on the altitude of 800-900 meters above sea level, in the lower part of Voskepar Range. The town lies in the Valley of Koghb River’s right feeder. The total area is 4009 hectares, with a population of 5500 inhabitants.

The community is located 198 km awayfrom Yerevan. The relief is difficult withsloping and split hillsides; the only flat areaof Noyemberyan is its central part.

Noyemberyan is in a light-humid subtropical zone. The winter here is mild and humid; the summer is hot with relatively humid air. Average annual temperature is 10,4o C. The sun shines about 2100 hours annually.

Noyemberyan is surrounded mainly by forests. The forest begins about 500-600 meters from the town.

Brief description of Noyemberyan economy

Noyemberyan is a community with unique combination of rural and urban life. On one hand,it is a developed agricultural centre; on the other hand, its trade and service sectors are developing.

Despite the lack of agricultural resources, people of Noyemberyan grow and process peaches and grapes in neighbouring rural lands and develop cattle breeding. Recently growing and processing of apples, pineapples, plums and figs became common in gardening.

Many people in Noyemberyan are involved in cattle breeding. “African swine” plague brought decline to swine breeding and hit many households. Obviously, the swine breeding will not recover in the near future by traditional methods. Neat cattle breeding meet only households’ demand. Still, there are several large farms. Rabbit breeding is in development.

Noyemberyan is rich of bee keeping traditions. Over 100 households produce honey. It is self-consumed or sold to the locals and in the capital.

Noyemberyan is the regional trade centre. Neighbouring villagers do almost half of the community’s trade. Strong competition in trade brings improvement of service and conditions in shops and markets.

The service sector is also developing in the community. Enterprises in this sector are still underdeveloped in comparison with the ones in neighbouring communities and have improvement potential.

Food-producing enterprises grow in Noyemberyan. Bread producers provide high quality and relatively cheap products. Candy, refreshments anddairy factories also function successfully. They meet mainly the regional market’s demand.

Recent crisis lessened the demand for wood and stone products from Noyemberyan. However, there are middle scale producers, who can meet the regional demand if construction sector develops.

Competitive advantages of Noyemberyan

The economy of Noyemberyan has numerous competitive advantages. Some enterprises have noticed this and currently use these advantages.

The community’s competitive advantages can be listed as follows

Natural

  • Forest resources with rich berry and fruit harvest
  • Diversity of vertical climate zones
  • Water resources
  • Felsite, basalt, zeolite mines
  • Ecologically clean nature
  • Mild and warm climate
  • Sunny days
  • Crossroads

Professional, human resources

  • Wine producers
  • Canned food producers
  • Carpenters
  • Traditional handicrafts professionals
  • Gardeners
  • Cheese producers
  • Bee keepers
  • Painters
  • Cooperative community environment
  • Civil activeness

Figure 1 Community Stakeholders during the kick off the programme

Technology resources

  • Traditional technologies of home-made wine and vodka production
  • Stone processing technologies
  • Traditional technologies of home-made canned fruits
  • Refrigerators

Economic sector analysis of Noyemberyan

The economic analysis of community is based on two criteria. Firstly, the profitability of economic sectors is studied and compared with the same sectors’ profitability of neighbouring communities. Secondly, cooperation between the economic sectors in Noyemberyan is studied, especially how given sector is prone to cooperate with other economic sectors.

The sector profitability is higher than the same sectors in other communities / The comparative sector profitability is lower
The sector is prone to cooperate with other sectors of economy / Strategic sectors
  • Gardening
  • Trade
  • Bee keeping
/ Sectors tend to improve
  • Harvest processing (vodka, wine producing, tinning, drying rooms)
  • Food production
  • Service sector
  • Cargo transportation
  • Bread production
  • Meat production

Closed to cooperation / Busy or full sectors
  • Taxi
/ Unsteady sectors
  • Milk production
  • Stone processing
  • Wood processing

The perspective of Noyemberyan economy are the sectors prone to cooperation. Economic development potential is accumulated in these sectors. These sectors may also put local competitive advantages into practice.

Productivity calculation of main economic sectors

Below is the productivity calculation of gardening, cattle breeding and bee keeping of Noyemberyan. Productivity is the main competitiveness index of a sector. It shows which sector needs development in a certain community. Productivity of the same economic sector varies from community to community.

Comparative advantages of gardening

Table. Productivity calculation of gardening

1 / Fruit name / Peach / Apple / Pineapple
2 / Average harvest from one hectare – kg[1] / 25,000 / 30,000 / 30,000
3 / Average wholesale price perone kg (2009) / 120 / 150 / 200
4 / Profit from one hectare ('2'x'3') / 3,000,000 / 4,500,000 / 6,000,000
5 / People/days worked on a hectare / 200 / 100 / 100
6 / People/years worked on a hectare ('5':300) / 0,6 / 0,3 / 0,3
7 / Annual productivity of a person ('4':'6') / 5,000,000 / 15,000,000 / 18,000,000

It is obvious that traditional peach production in Noyemberyan is behind apple and pineapple production. It is not accidentally that many garden keepers and entrepreneurs pay attention to new fruitsorts, while planting new gardens.

Amount of peach gardens and short time of harvesting brings continuous price decrease.

Thanks to its natural and climatic conditions, Noyemberyan outrivalsthe neighbouring regions about twice in gardening productivity.

Noyemberyan is champion in Armenia’s peach production. In other fruit production indexes, it is very close to AraratValley.

Comparative advantages of cattle breeding

The cattle’s breeding is far behind the gardening in Noyemberyan. However, different climatic zones give opportunity to develop the sector especially in upper regions.

Table . Productivity calculation for cattle breeding.

1 / Name / Swine / Cow / Bee
2 / Possible to by for 1 mln AMD[2] / 40 two-months old piglets / 4 cows / 20 beehive
3 / Results from a unit / 50 kg of pork from each of six-months pig / 2,000 l of milk
1 calf / 20 kg of honey
4 / Total results / 2,000 kg of pork / 8 000 l of milk
4 calf / 400 kg of honey
5 / Wholesale price of a unit / 1,600 AMD for one kilo of pork / 100 AMD for one litre of milk
100,000 AMD for a calf / 2,000 AMD
6 / Profit from one mln AMD investment ('4'x'5') / 3,200,000 AMD / 1,200,000 AMD / 800,000 AMD
7 / Required amount of worker/days / 120 / 270 / 60
8 / Required amount of worker/years ('7':300) / 0,4 / 0,9 / 0,2
9 / Annual productivity of single worker ('6':'8') / 8,000,000 AMD / 1,350,000 AMD / 4,000,000 AMD

Figure 2 Bee-keeping is one of the most productive economic sectors of Noyemberyan

Noyemberyan has one of the highest swine-breeding indicesin Armenia. In last two years, a devastating disease killed all the swine livestock. For further development of the sector, new approaches, such as enough isolation of swine and the establishment of farms need to be applied. Once the disease is defeated, the swine livestock can be triplicatedonly in fewmonths. It can become a profitable source of income for over 300 families in Noyemberyan.

Cattle breeding sector in Noyemberyan is behind the leading cattle breeding regions of Armenia. This sector in Noyemberyan can meet part of internal demand.

The situation is completely different in bee-keeping sector of Noyemberyan. It can compete with all the bee-keeping regions of Armenia with its productivity and quality.

Promising economic sectors of Noyemberyan: Value chains

One of the key economic sectors in Noyemberyan is gardening. Currently it is concentrated on fruit growing. There are no bigger value-creating chains such as fruit and forest berry processing enterprises, freight shippers, wholesale traders and other parts of the chain below.

In every following value chain stage, more significant values and productivity are created. To only establish production enterprises is not enough for the functioning of the chain. . It is necessary to establish enterprises ensuring corresponding environment. This concept will be presented in details in the “Recommendations” chapter.

Stockbreeding plays significant role in Noyemberyan’s employment. Meat production is one of high-productivity sectors.

The followingis the value chain of meat production.

To apply the value chain for meat production it is not enough to establish special enterprises. First, the traditional stockbreeding must be reformed to modern farms. These farms must be insured for diseases and agricultural risks. In addition, veterinary, stockbreeding services, technology innovations and wholesale traders must build efficient cooperation to improve the sector competitiveness.

Recommendations

InitiativeA. -Continuous fruit processing (production of sorted, packed and frozen fruits, jam, preserve, compote and dried fruit)

Functioning enterprises

Local food processing enterprises (lemonade, candy production) will invest in local fruit processing technologies.

Freight shippers and wholesale traders will study Georgian and Russian Customs legislation to export fruits and processed products to these countries’ markets. State Revenue Committee and Business centre will provide with professional support. GTZ along with GCCI and Business centrewill work on the establishment of business contacts with CCIs of Georgia, North Caucasus cities, international organizations and business communities.

Large-scale enterprises

As an investingtool, connection between the local producers and supermarkets in Yerevan willbe established.

Start-ups

GTZ and other business supporting organizations will support the establishment of new enterprises in this sector and investment of new technologies through trainings, consultations andfinancing. New enterprises will be production and wholesale-oriented. Part of local freight shippers will be retrained and provide wholesaler-style services.

Business support

Restarting of “Navi” business centre. It will concentrate on the provision ofsector related business information, customs relations and local/regional market studies. GTZ will provide technical assistance forthe rehabilitation of the business centre. GCCI will provide professional assistance. One of business centre and business unions’objectives will be the establishment of a united brand for Noyemberyan. This will make selling of local products in Yerevan and the regions of Armenia more productive and easier.

Local media will promote the sector with information support.

Local self-governments and the state

Local self-government and the regional government will support the development of enterprises by providing with required premises, possible setting of tax and duty benefits, as well as boosting business relations with regions and communities of neighbouring countries. Exhibitions will be organized for local production and the participation of local producers in different exhibitions will be supported.

Education

Noyemberyan State College will offer competitive professions or short-term courses, which will promote fruit growing and fruit processing. This will bring new technologies in agriculture, preserving specialists andcommodity managers/specialists.

Initiative B. Meat processing and development of realization network

Functioning enterprises and agrarian households

Farms will act in swine-breeding and other meat-bearing stockbreeding. Cooperation will start between them in market, veterinary, procurement and other.

Procurement managers will improve their relations in the capital, study the Georgian market to organize possible export of meat and meat products. Customs sector will be studied. Meat procurement officers will improve the mechanization level of their enterprises.

Start-ups

Establishment of small meat-processing enterprises for basturma, sujukh, sausage, frankfurter, canned meat products, smoke-dried meat, khash and other meat products.

Local production will meet the forage demand.

Business support

Veterinary trainings will be organized to overcome livestock diseases. Supporting institutions with entrepreneurs will import and adapt new animal sorts, such as rabbits or ostriches.

Start-up support projects will be directed for meat production (sausage, canned meat products, smoke drying, etc.) and will include trainings, consultations and financial support.

The Business centre will provide enterprises in the sector with technical and information support. Local media will promote the sector with information support.

Brand of Noyemberyan will be developed for this sector.

International organizations will support the start-ups in new technology investment and financing.

Local self-government bodiesand the state

The municipality and the regional government will promote the development of quality veterinary services. The government will make relevantland allocationsand the borders will beprecisely marked.Those land allocations will be made from forest resources.Regional government and the Ministry of Environment Protection will take care of land, livestock vaccination and disinfection.

Local self-government will support the start-ups with organizing exhibitions and other promotion events.

Education

Noyemberyan State College will deliver courses on stockbreeding and veterinary, as well as meat processing technology.

InitiativeC. Hiking zone in Noyemberyan downtown

Local self-government bodies

Noyemberyan municipalitywill declare the territory with about200-meterlength and 20 meters width between AGBA Credit Agricole Bank and “Mher’s Gate” place as a pedestrianzone. Driving will be banned. The municipalitywill improvethe area conditions, rebuildasphalt or laypavement, implement tree planting and landscape gardening. It will adjustareas for development of hiking, which small enterprises willorganize.

Waste removal will improve.

Entrepreneurs

The entrepreneurs will establish shops, kiosks, cafes and other businesses for organizationof recreation in accordance with architectural rules of the municipality.

International organizations

International organizations will support the organization of waste removal by providing waste/garbage bins, waste removal vehicles, and building appropriate places for the bins.

Trainings will be conducted on organization of hiking oriented businesses and service improvement.

InitiativeD. Traffic and transport hub

Entrepreneurs

New restaurants,guesthouses, car maintenance centres, fast food shops or petrol stations will be established in traffic hubs. Community agricultural market will befounded, which may also play regional role.

Local self-government, state institutions

Landallocationswill be made in relevantareas, architectural standards will be set.

About the programme

Local Economic Development programme PACA was introduced in Armenia by German Technical Cooperation (GTZ). It has been implemented in 21 communities. In Armenia, it is implemented through Gegharkunik Chamber of Commerce and Industry (GCCI).

The objectives of the programme are the appraisal of community economy, identification ofcompetitive advantages and development of initiatives, which will create a competitive economy. This will bring profits and new employment.

Figure 3 Workshop with the local team, community mapping

Main programme principles are:

  • Participatory method,
  • Concentration on strengths rather than weaknesses of a community
  • Quick and visible results,
  • Communication and dialogue between community stakeholders,
  • “Bottom-up” approach,
  • Development based on local resources.

Figure 4 Local team member Khachik Gishyan during the Kick off workshop

The programme consists of the following stages

  1. Selection of the local team, which involves also community stakeholders,
  2. Local team members and experts evaluate current economic situation and competitive advantages, identify economic development initiatives,
  3. Kick off workshop where the communitystakeholders become aware of the local economic development programme and getinvolved in it,
  4. Interviews and mini-workshops. This stage supposes involvement of as many stakeholders as possible.
  5. Results elaboration. In this period, the local team elaborates and summarizes the interview and workshop results,
  6. Results presentation. During this event, the community stakeholders become aware of the programme results and proposed initiatives.
  7. Elaboration of action plan for proposed initiatives with interested parties.
  8. Coaching during 18 months.

Special thanks to Noyemberyan municipality staff, in the person of Mayor Mr. Vanush Amiraghyan for supporting the programme implementation.