Modern greenhouse crop production development
Modern greenhouse crop production development
Business Model Description
Invest in small- and medium-size greenhouses by farmers and commercial firms, as well as large-scale industrial greenhouses by large investors or corporations for crop production, focusing on greenhouses equipped with advanced and sustainable technological solutions.
Expected Impact
Boost crop production via modern sustainable and efficient technologies, and ensure steady supply of vegetables, fruits and flowers for local consumption and export.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Armenia: Ararat
- Armenia: Armavir
- Armenia: Kotayk
Sector Classification
Food and Beverage
In 2018, agriculture was 13.7% of GDP, 28% of export and 32.2% of labor (6). Key challenges in the sector include inefficient water use and pollution (water stress of 57.43% (12)), inefficient soil use and soil damage (32% agri-land utilized) (10), high food waste and loss (15% in cereals; 19% in roots and tubers; 20% in fish, and 23% in eggs subsector (5)) as well as low farmer incomes.
The Government Plan 2019-2023 promotes the efficient use of agricultural resources and improved access of irrigation water for all. Pillars of the Plan are to enhance the productivity and food security, expand exports, promote effective farming technologies (intensive orchards, drip irrigation, anti-hail systems, modern storage and machinery), and increase income from agricultural activities (1).
In 2018, 48% of labor in agriculture were women. They are more engaged in informal (and less secure) low skill field work, e.g. harvesting, sorting, and packaging. Women have low access to land, technologies, knowledge and finance, and are less likely to run their own farm. They are paid 35% less than men for their work (7). The Ministry of Agriculture was dominated by men, i.e. 62% men and 38% women (11).
Government support tools in agriculture include low interest rate leasing or lending programmes for farmers to invest in agri-machinery and equipment, technologies (intensive orchards, drip irrigation) and hail protection systems and greenhouses. The Government also leads a programme on promoting agricultural insurance systems (1, 3).
Key bottlenecks in agri-food include prevalence of fragmented smallholders (330,000, with less than 1.5ha each) and low cooperation, low productivity due to low investment in and inefficient farming and marketing technologies and practices, underdeveloped market infrastructure (e.g. low storage capacity), and low use of sustainable practices (24).
Food and Agriculture
Greenhouse production allows for reducing weather risks in agriculture, which are prominent in Armenia. The greenhouse area increased from 640 ha to 1300 ha between 2014-2019. Modern greenhouses with sustainable technologies will increase productivity and offer decent and high salary employment to the community, while reducing or eliminating negative environmental impacts (24).
The Agriculture Development Strategy 2020-2030 aims at enhancing productivity and market operation in agriculture, development of agriculture data and forecasting systems. One of the key priorities is the promotion of modern facilities and technologies, including farming and post-harvest technologies (e.g. cold storage), modern greenhouses and irrigation, and disaster protection systems (11).
The Government provides subsidies (interest rate subsidy) for financing investment in modern greenhouses (1, 3, 22, 24).
Agricultural Products
Pipeline Opportunity
Modern greenhouse crop production development
Invest in small- and medium-size greenhouses by farmers and commercial firms, as well as large-scale industrial greenhouses by large investors or corporations for crop production, focusing on greenhouses equipped with advanced and sustainable technological solutions.
Business Case
Market Size and Environment
Over 350,000 ha of land are available for modern greenhouse productions.
To pursue the modern greenhouse crop production, as of 2019, 8,500 ha of community and state-owned land is available under the category “objects of industrial, mining, and other use (for agriculture use)", with an additional 353,400 ha under the category “Agricultural – for other uses” (26).
The Eurasian Economic Union provides a strong export market for greenhouse produce from Armenia, especially vegetables.
Indicative Return
20% - 25%
The investment cost of a 1 ha modern greenhouse is $80-200 per sqm, depending on the greenhouse type (e.g. plastic cover or glass cover, soil or hydroponics). The estimated IRR of vegetable greenhouses varies from 15 to 33%, while the IRR of flower greenhouses is expected to be higher (21, 22, 24).
Investment Timeframe
Short Term (0–5 years)
Greenhouse commercialization has a short-term period. Revenue can be generated within one year after the establishment of the structure (21, 24).
Ticket Size
USD 500,000 - USD 1 million
Market Risks & Scale Obstacles
Business - Supply Chain Constraints
Business - High running costs
Impact Case
Sustainable Development Need
Armenia's agricultural productivity is low compared to peer countries, which also leads to limited income opportunities for communities. The country's greenhouse area stands at only 1,300 ha in 2019, and only a small part of this area (177 ha) applies advanced technologies (24, 22).
Unsustainable crop farming practices prevail in Armenia's agriculture, causing inefficient use of water, water and soil pollution, and soil erosion and degradation (24, 27).
Gender & Marginalisation
Women in agriculture have less job opportunities and are paid lower salaries than men in Armenia.
Expected Development Outcome
Increased productivity of the agricultural production and enhanced food security, reduced prices for primary agricultural products by creating steady supply of those vegetables and other products around-the-year, and increased efficiency of using inputs, such as fertilizers, pesticides and water.
Reduced risks in agricultural production stemming from unfavourable weather conditions, disasters, pests and diseases.
Enhanced export promotion as a significant share of greenhouse crops is sold to foreign countries in the region.
Gender & Marginalisation
Greenhouse crop production provides numerous, well paid and better condition job opportunities, especially for women in communities where the greenhouses are established.
Primary SDGs addressed
2.3.1 Volume of production per labour unit by classes of farming/pastoral/forestry enterprise size
2.3.2 Average income of small-scale food producers, by sex and indigenous status
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Outcome Risks
Significant amounts of gas are required to heat greenhouses, which affects the environment and incurs substantial costs (with gas contributing over 50% of greenhouse crop production costs) (21, 24).
Most of Armenia's greenhouses are covered by polyethylene, which has a useful life of three years. The material's use may have negative effects on the environment, especially if it is not recycled.
Impact Risks
The lack of agronomists, plant protection specialists and greenhouse managers as well as weak marketing and logistics capacities by small farmers may limit export opportunities of produce.
Impact Classification
What
Modern greenhouses will boost crop production, improve the wellbeing of farmers and support the community at large.
Risk
The model is proven and improves environmental impacts of agricultural practices, but greenhouses may have negative environmental effects after dismantling, when due recycling is not conducted.
Impact Thesis
Boost crop production via modern sustainable and efficient technologies, and ensure steady supply of vegetables, fruits and flowers for local consumption and export.
Enabling Environment
Policy Environment
Armenia promotes greenhouse production through various subsidies and privileges for the establishment and operation of modern greenhouses (1, 3, 11, 24, 29).
The Government Plan 2019-2023 promotes the efficient use of and access to agricultural resources to improve food security and increase income from agriculture (1).
The Agriculture Development Strategy 2020-2030 prioritizes the enhancement of productivity and agri-market operations. One of the key priorities is the promotion of investments in modern technologies, including for greenhouses (11).
Financial Environment
Financial incentives: Investments in agriculture, including for greenhouses, benefit from subsidies for investing in technologies: (i) loans with 0% or 5% interest rate (11 % market rate); (ii) coverage of 50% of greenhouse investment cost; (iii) and leasing at 4% (3, 24).
Fiscal incentives: The revenue generated from the proceeds of greenhouse sales (items under the codes FZG 0106 41 000, 0106 90 00 90, 5305 00 000 0 and FZG 9406 00 310 0) are exempted from VAT (3, 24, 28).
Fiscal incentives: Greenhouse equipment and goods (under the codes: FZG AA 0106 41 000, 0106 90 00 90, 5305 00 000 0) and industrial 9406 00 310 0) are exempted from VAT when being imported (3).
Regulatory Environment
The Decree No 1612-L of 14 November 2019 establishes that the construction of greenhouses with an area exceeding 1,000 m2 is to be constructed with the required construction licenses and by a professional firm (29).
Marketplace Participants
Private Sector
Exporters of vegetables, fruits and flowers, such as Mavas, Eco Tomato, Biga, Spayka and Ecoland; supermarket chains in Armenia such as Yerevan City, SAS, Carrefour and Nor Zovq.
Government
Ministry of Economy, Ministry of Environment, State Food Safety Agency, State Cadastre Committee, Community Municipalities.
Multilaterals
World Bank, European Bank for Reconstruction and Development (EBRD), United Nations Development Programme (UNDP), USAID, European Union (EU).
Non-Profit
Greenhouse Association of Armenia, Agribusiness Teaching Center (offering greenhouse course).
Public-Private Partnership
Community-Business Cooperation for Pasture Use and Management.
Target Locations
Armenia: Ararat
Armenia: Armavir
Armenia: Kotayk
References
- (1) Government action program 2019-2023, https://www.gov.am/am/Five-Year-Action-Program.
- (2) National strategy and action program to combat desertification in the republic of Armenia, Ministry of Nature Protection of Armenia, http://www.mnp.am/uploads/1/1551885091anapat_eng-1.pdf.
- (3) Ministry of Agriculture, www.minagro.am/պետական-օժանդակության-ծրագրեր.
- (4) State Cadaster Committee, Armenia, https://www.cadastre.am.
- (5) FAO, Food Waste and Loss in Armenia, http://www.fao.org/3/a-au842e.pdf.
- (6) World Bank, Development Indicators, https://data.worldbank.org/indicator/NV.AGR.TOTL.ZS?locations=AM&view=chart.
- (7) Statistical Committee of Armenia, Labor Market in Armenia, 2019.
- (8) Statistical Committee of Armenia, Food Security and Poverty in Armenia, 2019, https://www.armstat.am/am/?nid=82&id=2125.
- (9) Intended Nationally Determined Contributions of the Republic of Armenia under the UN Framework Convention on Climate Change (UNFCCC), https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Armenia%20First/INDC-Armenia.pdf.
- (10) Statistical Committee of Armenia, Environmental Statistics of Armenia, 2018, https://www.armstat.am/file/article/eco_booklet_2018.pdf.
- (11) The Strategy of Main Directions of the Development of Agriculture of Armenia 2020-2030, https://mineconomy.am/en/page/1467.
- (12) FAO AQUASTAT, http://www.fao.org/AQUASTAT/en.
- (21) UNDP interviews with stakeholders, 2019.
- (22) Agro-investment Guide Armenia, https://www.eda.admin.ch/dam/countries/countries-content/armenia/en/Investment%20Guide.pdf.
- (23) State Cadaster Committee, Armenia, https://www.cadastre.am/storage/files/pages/pg_4062968307_22.pdf.
- (24) Export supply chain of greenhouse crops: Armenia, G. Gabrielyan, 2016, International Finance Corporation.
- (25) Statistical Committee of Armenia, Annual Reports on Foreign Trade, https://www.armstat.am/am/?nid=82&id=2076.
- (26) Cadaster Committee of Armenia, 2019, https://www.cadastre.am/storage/files/pages/pg_7311379278_2019NaxnHanr_bal1.pdf.
- (27) Voluntary National Report (VNR) of Armenia, for the UN High-level Political Forum on Sustainable Development, 2018.
- (28) Tax Code, https://www.arlis.am.
- (29) Government Decision 1612-L of 14 November 2019, https://www.arlis.am.