RURAL DEVELOPMENT OF KARABAKH UNDERWAY

Revitalizing villages in key aspects of socio-economic activity

AGRICULTURAL INITIATIVE UNDERWAY

With the Rebirth of Artsakh Regional Development Program underway, Armenia Fund USA with its international affiliates focuses on the revitalization of Karabakh’s villages through a series of capacity building initiatives that include social infrastructure (schools, clinics, access roads, water systems) and economic development projects (Agricultural Initiative) in the villages of three key region of Nagorno-Karabakh.

The Agricultural Initiative, designed to upgrade the agricultural sector of Karabakh’s economy, is a crucial factor in the overall socio-economic development plan for the region. It is a three-year agricultural development project that will improve the standard of living of the villages of Nagorno-Karabakh by targeting poverty reduction. The project started in the war-torn region of Mardakert and its cluster of villages and is to be continuously carried onto other regions. Hadrut in Nagorno-Karabakh will follow Mardakert’s agricultural development project.

Over 18 villages with a population of 9,371 in 3,125 households will be direct beneficiaries of this initiative. The newly established Mardakert Agricultural Development Association will start accepting membership application from local farmers in the fall.

The ADA will serve private lands first, then service small rented fields near the villages, and if resources are available, larger leased lands will be serviced last.

The MADA will be “an agent of change” for a region and its people who are just beginning to adapt to both a new economic model and a new organizational structure.

Currently, the Fund is in the process of purchasing the necessary equipment for the first ADA. Tractors, share plows, wheat seed drills, trucks, mowers, and combines are being purchased and shipped from Russia and China to Armenia and then Nagorno-Karabakh. The total cost for farm equipment needs for Mardakert ADA for fall 2006 is about $700,000. At present, agricultural equipment, among them tractors, combines, tracks, plows and harrows, have been ordered at a total cost of approximately $300,000.

Nerqin Horatagh is one of the villages in Mardakert region where Agricultural Initiative will be implemented

Apart from providing upgraded technical assistance to farmers, the
Agricultural Initiative involves significant efforts to emphasize the social factor of change in agricultural production in Karabakh. The idea of
Agricultural Development Associations, the agricultural trainings for farmers designed by experts, etc. are specific steps to engage rural communities to become entrepreneurs.

PROJECT BACKGROUND

In spring of 2006, Armenia Fund USA and all affiliates of All-Armenian Fund designed and launched the Rebirth of Artsakh Regional Development Program. The three-year, three-phase initiative focuses on developing the regions of Nagorno-Karabakh through a series of projects that include construction of new schools, healthcare facilities, drinking and irrigation water systems, access roads and an agricultural development project. The Rebirth of Artsakh Regional Development is shared by all affiliates of the Fund, with Armenia Fund USA, Eastern U.S. affiliate, spearheading the agricultural development component, known as the Agricultural Initiative.

LAUNCHING THE AGRO INITIATIVE:

The Agricultural Initiative, designed by Armenia Fund USA (the Fund) is a three-year agricultural development project that aims at upgrading the standard of living of the rural communities of Nagorno-Karabakh by targeting poverty reduction in the region.

The Fund, with its worldwide affiliates, has been addressing these core needs areas since 1996. The Rebirth of Artsakh Regional Development Program with its various components will build upon past successful projects and further develop the above mentioned basic infrastructure components.

Addressing the issue of functional agricultural infrastructure, given the region’s historical potential as a major agricultural area, however, appeared to be the logical place to start in revitalizing the agricultural sector of Karabakh’s economy. After conducting a field study of Nagorno-Karabakh villages and assessment of the situation of rural farming communities there, a team of leading experts in agricultural production from Turnaround Associates, Inc., a New York based corporate consulting firm, structured a strategic plan to expand Karabakh’s food production capabilities by careful balancing of the import/export ration, thereby reducing the region’s dependency on imported products essential to basic daily life.

The first steps were to support rural farmers in nearly all aspects of agricultural activity. However, without access to fundamental farm equipment, this was simply impossible. The experts’ team therefore focused on strategies that would support purchase and maintenance of new agricultural equipment and provide technical support related services to small farmers at reasonable rates. An effective way of doing this was through the establishment of Agricultural Development Associations (ADAs) complemented by Service Centers to house equipment and serve as a source of technology transfer through Agricultural Services Corporations (ASCOs).

Mardakert Region of Nagorno-Karabakh was selected as the initial place to establish the first ADA and ASCO.

Several reasons were behind this choice: the importance of Mardakert as a historically ripe land for agricultural development, its strategic location along the north-eastern border of Nagorno-Karabakh, and the extensive damage it suffered from war in 1992. Additionally, the Nagorno-Karabakh government selected the region to be the first to focus on to upgrade basic infrastructure. Also, the priority was given to Mardakert because of its larger population and land base, its potential for better irrigation options, and its proximity to more productive lowlands.

MARDAKERT AGRICULTURAL DEVELOPMENT ASSOCIATION AND MARDAKERT AGRICULTURAL SERVICES ASSOCIATION (MADA AND MASCO)

In October 2005, after extensive deliberation over the clear definition of functions and structure of the two main administrative entities to implement the Agro Initiative, the Turnaround Associates designed an organizational structure and proposed a draft charter for a model Agricultural Development Association (ADA), which later on was adjusted to operate under the laws and regulations of the Nagorno-Karabakh government.

Mardakert farmers gathered to learn more about the Agricultural Development Association

As a result, Armenia Fund USA, and All-Armenia Fund in Yerevan, in cooperation with Nagorno-Karabakh’s governments and Ministry of Agriculture, set the stage for the establishment of Mardakert Agricultural Development Association (MADA), a voluntary non-profit association for farmers, and Mardakert Agricultural Services Corporation (MASCO), a joint stock commercial company to provide technical and farm equipment services at affordable fees to farmer members of MADA. The latter, is an independent voluntary union formed to mutually benefit the participating members in their agricultural production activities. It will be owed by a cluster of several hundred subsistence farmers in Mardakert villages.

Initially the MADA’s activities are to be focused on growing wheat because it is currently the dominant field crop in Karabakh. As farmers become more independent and affluent in their agro production, they will increasingly be able to invest in longer term or higher profit items. These include, but are not limited to grapes, fruit trees, pedigree livestock and in value-added processing such as meat packing, canning, wine making and diary processing. For instance, each dollar invested in grain, will bring an added value of $5-$8 in livestock. The ultimate purpose of the Mardakert ADA is to help small rural farmers to transform from merely subsistence farming to export production.
MADA is presently under formation, and its members will be eligible to receive agricultural services at discounted prices through the Operations Center of MASCO by fall 2006.

Meetings in Mardakert between Armenia Fund USA, Turnaround Associates and Nagorno-Karabakh authorities

Nagorno-Karabakh Trip, May 2006: In May, 2006, the Chairman of Armenia Fund USA, accompanied by the Executive Director and experts from Turnaround Associates, traveled to Nagorno-Karabakh to oversee and provide technical assistance for the establishment of the first Agricultural Development Association in Mardakert. Technical support, as reported by the experts, includes: site visits to 16 of the 18 villages in Mardakert: review of legal and planning documents related to the formation and operation of a holding company to control ADA assets, an operating company to carry out day-to-day activities and a farmers’ organization that—on a collaborative basis— will own and operate the ADA Service Center: preparation of computer models to forecast investment capital needs and cash flows: interviewing of potential staff to hold the position of a Controller and a General Manager who will run the activities of MASCO under the direction of an Executive Committee composed of representatives of all parties involved.

A Director in Residence was appointed by Armenia Fund USA to oversee the implementation of the project in Nagorno-Karabakh.

A number of agro technical considerations – horticultural crops, fresh vegetables, field crops, fertilizers, improved seed, livestock breeding, farm equipment– were identified by the experts to further diversify the areas of intervention through the ADAs.

To introduce Mardakert farmers to the organizational structure of the ADA and encourage them to join, Armenia Fund USA held meetings with Karabakh farmers to explain the benefits of becoming a member of the ADA. Karabakh’s Minister of Agriculture, the technical team from the United States, as well as Himnadram representatives also participated in the meetings.

Particularly noteworthy were farmers’ openness to the idea of an Agricultural Development Association in Mardakert, their willingness to cooperate and receive training in areas where current agricultural methods had proven outmoded and the general interest in improving agricultural production through collective efforts.

During the May visit, Mardakert Agricultural Services Association (MASCO) Operations Center was selected (an area of 9,500 square meters) to house MASCO operations staff offices, secure storage area for equipment, maintenance facilities, a fuel storage tank, a fertilizer storage and a storage for agricultural chemicals.

The site, located in the city of Mardakert, has not been in use for over 10 years. Severely damaged during the war, the building will be renovated through the funding from donor agencies to store and maintain new equipment under a long-term lease.

The operational budget for MASCO has been estimated to be about $110,000 for the first year. There will be purchases of fertilizers, chemicals and seeds in the first years, but later these commodities will be acquired as needed with MASCO operation funds and then sold to the ADA members at a small premium over cost of purchase, transport and handling.

At this time, funds to procure the initial complement of farm equipment, hire personnel and assist with the formation and member sign-up for MADA have been secured through Armenia Fund USA’s donors.