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ArmInfo News Agency’s Interview with Karen Baghdasaryan, Head of Project Management Division of Spayka LLC
by Elita Babayan
Mr. Baghdasaryan, over a short period of time, the vehicle fleet of Spayka LLC has become one of the most dynamic fleets throughout the region and, probably, one can call your company translational. Would you tell about the technical achievements of Spayka? What place does the company occupy in the transportation market of Armenia?
One of the strategic goals of our company is to get to the transnational level. I can say with confidence that we have already attained this goal. The company is constantly expanding its geographic scope and has managed to cover almost all Europe and the CIS. To serve this territory effectively, Spayka is currently setting up new international departments and also employs foreigners. The company changes its ideology, its strategic priorities, and the system of management. We are guided first and foremost by the global market when taking strategic decisions today. Today the transport fleet of the company serves not only Armenia-Europe or Armenia-the CIS directions, but also Europe-the CIS direction. Our customers are large Russian organizations, particularly, exporters of petrochemical industry, and companies importing fruits and flowers from Europe to Russia.
Touching on the technical achievements of the company, I’d like to mention that at the moment the vehicle fleet of Spayka LLC has 85 new trucks equipped with refrigerators and an online control system. Besides the vehicle fleet, the company also has special-purpose machines and tow-cars. Thanks to these cars, the Upper Lars road has been open during the winter for two years. This has also become possible due to the fruitful cooperation with Georgia. Spayka provided its towing machines and the Georgian part – snow-removal machines. I’d like to mention that all Armenian transport operators made advantage of this opportunity. Some partners from Russia and Ukraine also applied to us.
Mr. Baghdasaryan, in 2011 Spayka set up a plant to produce euro-pallets from polystyrene foam. The company was also going to export them.
Yes, the company had such plans, and I’d say that they are successfully being carried out today. Over the first half of 2011 the products of the plant were mostly sold in the domestic market. Alongside with increasing the production capacity, we also increased the output of the products and started delivering part of them to Georgia and Russia.
And what is the total volume of the export delivery and its share in the total output?
The average monthly production output is nearly 15 thsd pallets today; it is approximately 70% of the production. The plant will be brought to the full designed capacity by mid 2012.
Spayka has managed to gain an indisputable leading position in the field of export of fresh fruits and vegetables. Therefore, I’d like to ask you about the yield of fruits and vegetables in Armenia in the past and about the expectations for this year.
Last year we exported just 6 thsd tons of fruits and vegetables because of bad harvest. Chiefly apricots and grapes are exported from Armenia and white cabbages have been added to them over the last years. The record beating export of white cabbages was fixed in Armenia over the last two years. Spayka is going to optimize the gathering and storing system of fruits and vegetables in the national scale. We mean flexible logistics for organization of gathering the harvest and creation of specialized storage facilities in the regions. I’d like to mention that we consider the activity of Spayka as a national project aimed at creating a strong infrastructure, which will allow Armenia to become an international player for some fresh fruits.
Many experts point out a serious decline in the yield over the past few years against the background of technical and technological underdevelopment of the agrarian sector. They think the decline will continue. Do you agree with this?
I understand that very often the forecasts are negative. The matter is that all our farmers constantly need the support of the state. I think the development of the agrarian sector is impossible without that support. For instance, the apricot yield in 2011 was not bad in Ararat region, but it was very bad in Armavir region because of the hail As a result, the low yield of this fruit led to the price boost. This year the price of 1 kg of apricots did not go lower than 500 AMD. But even the worse thing is that the agriculture sphere suffered profit split, i.e. some farmers received excessive income, others earned nothing. In the meantime, all of them spent similar money and efforts to grow this fruit, and this is very unfair. That is why it is necessary to create equal conditions for all agrarians. We recommend creating a council for assessment of the risks and the opportunities of export-oriented directions of agriculture and to spend the state funds on creation of the infrastructure, which will provide a breakthrough in these directions. It is well known that we have good apricot yield once every three or four years. The reason is the freezing in March, followed by hail in May-June, which reduces the yield by up to 50%. This is equivalent to nearly 40 mln USD, which annually fails to be added to the GDP of the country. What shall we do? Instead of losing 120 mln USD within 3 years, one can estimate the necessary investments for acquisition of anti-hail facilities and provide financial resources for these purposes.
Do the authorities realize this problem today?
They realize the necessity to work with the regions and this is already a positive step. I think the responsible department should take decisions, which would protect the regions from natural disasters and would minimize their consequences. An impressive example of the authorities’ support is the initiative to set up the Armenian Harvest Promotion Center. The Center is going to create an environment for development of perspective directions of agriculture with an export potential, particularly, glass-grown industry, production of grapes for table use, development of competitive advantages of the regions in certain spheres of agriculture, etc.
What export indices will the company have at the end of this year?
According to our estimations, this year the export of fresh horticultural crops will total 20-25 thsd tons. 16% of exports will fall on fruits, particularly, apricots, peaches, crab cherries, and the rest will fall on the root crop, grapes and cabbages.
You have mentioned that last year apricots were very expensive. Was it this factor that made you reduce the export delivery of this fruit?
Yes, the company has really decided to restrict the apricot procurement, because the prices proved to be too high, which made the export of this fruit inefficient. I think the purchase prices could have been twice as low last year, and this would be economically reasonable. They say very often that the exporting companies stimulate growth of prices of fruits and vegetables. In fact, it is vitally important for us not to raise the prices. This helps us to “survive” in the international markets, to be more competitive. Our goal is to set up production of high-quality agricultural products and low prices in the country. All the parties benefit from this: the farmers, the consumers, and the procurers.
What markets does the company’s export policy cover this year, and how will this coverage change in the future?
The export policy of the company covers the post-Soviet countries. The lion's share of export falls on Russia; Ukraine and Belarus come next. Armenian fruits and vegetables are not so popular in Europe as in the CIS countries. There are certain demands to be met, and there are players to compete with. As regards the processed horticultural crops, they will mostly be exported to the European market.
Would you dwell on the project of the plant that will process and preserve fruits and vegetables? When will the plant be launched?
To begin with, the new plant is equipped with European facilities of the leading European companies and will have 200 work positions. The production will be carried out by the up-to-date Italian technologies. I’d also mention that the products of the plant will mostly be exported to European countries and the CIS. The plant capacity is huge in the regional scale, but we decided to act stage by stage. This year we will launch the first line for juice production, will set up a team and will gain experience in this sphere. Next year we’ll pass tо the full designed capacity. Here people like to produce without thinking about the sales; we are of a different mind. First of all it is necessary to receive high-quality products, obtain delivery contracts, and after that to increase the output. The range of the products includes more than 90 products under the trademarks “Araratfood” and "Araratfruit”, among them canned vegetables and fruits, pickled products, juices of fresh vegetables and fruits, tomato sauces, etc.
Spayka is also planning to launch a plant for assembly of bodies. Is that plant already operating?
Last year the heads of the companies Volvo Trucks Corporation and Bernard Krone GmbH visited us. The prototype models of these bodies have already been sent to Armenia, and this year the company will launch the assembly of cold storage trucks weighing 5 tons. They will be sold in both domestic and foreign markets.
How many such cold storage trucks will annually be assembled at the plant?
The new plant will manufacture nearly 150 cold storage trucks per annum. This is a very interesting and important project for Spayka, because the optimal organization of cropping is one of the most significant issues for us. The new cold storage trucks will allow us to solve the crop transportation problem not only in our company, but also throughout the republic.
How much money has the company already invested in implementation of its projects, and what investments will it make in 2012-2013?
Since 2010 more than 30 mln USD has been invested in our project. The most important thing is that the investors realize the efficiency of capital investments in the exportable products, especially, when there is such a wide field for investments: glass-grown sphere, processing, and effective logistics. Here one should be guided by the high-quality finished products rather than rough manufacturing, and use the competitive climatic advantages of our country. Unfortunately, our banking system has not yet worked out effective mechanisms of investment banking, which is a very important element for stimulating the business environment.
Actually, there is only one local bank that supports large project financing. It is Ameriabank. The Government can create favorable conditions for development of export spheres, but with no access to finances the entrepreneurs will be unable to develop and expand their business. Implementation of large projects requires an access to large finances and a positive attitude of the banks towards project financing. Unfortunately, one cannot do without foreign capital at the given stage. Therefore, our strategic goal is to attract international financial institutions to implement the future projects. The availability of the environment of foreign trade and project financing is the pledge of development of export-oriented economy.