Constraints and Potential to the Development of Rural Non-Farm Activities in Armenia.

Abstract

Agriculture is the prominent activity in the rural areas of Armenia. It is estimated to represent about 80% of rural employment, which is among the highest in countries in transition. This is partly a consequence of the collapse of industrial and other economic activities at the outset of transition and the difficulties since then to have them recover. This also reflects the insufficient development of the agricultural sector which has yet only partly developed backward and forward linkages which would contribute to the diversification of activities in the rural areas. Conversely, the modernization of the agriculture sector and its capacity to provide income to the farmers will imply diversification of activities so that the labour force released by agriculture can stay in rural areas. Poverty in rural areas and agricultural development are therefore closely interrelated.

The paper is organised as follows. The first section provides background information on the RNFE in Armenia. The second section summarises recent agricultural sector and macroeconomic developments in Armenia as they relate to the RNFE. The third section describes the sampled communities socio-economic structure, agricultural sector and natural resource base. Section 4 outlines our regional/community level analysis of the pattern of non-farm rural employment and income generating activities (IGAs) diversification in a transition economy context. Section 5 of the report is based on our social survey and focus group activities which analyse the main determinants of participation in the non-farm economy. The findings from section 5 are then discussed and elaborated upon in Section 6 of the report where data are presented on the activities of "successful" rural non-farm diversifiers - non-farm enterprises - which is presented in the context of the rural economies of the surveyed regions (Ararat, Gegharkounik and Syunik). Finally, the main findings of the paper are placed in a national context and RNFE policy proposals and suggestions on strategic planning are advanced.

Keywords: Rural non-farm economy, PRSP, community analysis, economic development, transition, enterprise development, income generating activities, poverty

JEL Classification: O13, O18, O57, P20