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«STRATEGY OF EXPORT – LED INDUSTRIAL POLICY OF REPUBLIC OF ARMENIA Yerevan TABLE OF CONTENTS 1. Policy Context 2. Current State 3. Goals and ...»

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● Support in engaging sales agents in target markets Capacity development /increasing competitiveness ● Co-financing workforce retraining programs ● Providing financial and technical assistance to firms in introducing internationally recognized quality management systems ● Supporting technology and knowledge transfer also utilizing Diaspora networks Promoting Research and Development ● Establishing techno-parks and industrial parks ● Providing company-university joint R&D grants ● Establishing venture funds Under sectoral development strategies, sector-specific support instruments and structures might be created excepting a discriminatory policy towards the remaining sectors.

5.3 Principles of application of support tools For the purpose of intervention, the Government prioritizes the tools and initiatives that are targeting the improvement of overall business environment and infrastructure. In the application of each type

of tools, RA Government will adopt the following principles:

1. Market testing of the support toolset before its application for the purpose of evaluating its efficiency

2. Compliance of the support with specific market failures and expected outcomes; definition of clear-cut dates and terms for suspending the government intervention (sunset rules)

3. Sectoral application: the application of toolset is tailored and adjusted in each sector

4. Synchronizing actions with the private sector

5. Risk-sharing principle: mainly co-financing rather than fully financing

6. Making maximum use of and relying on existing structures by developing the latter’s capacity.

6. Key Priority Initiatives

Targets for key medium-term initiatives are presented below:

–  –  –

A key objective of the sector is to ensure proper quality and its control. Other important issues include the limitation of the raw materials supply in the long-run, international acceptance of quality certificates provided by Armenian authorities, ensuring marketing in global markets, instability of transport communication and limited logistics routes for exporting alcoholic beverages (transit through Iranian territory is prohibited and Upper Lars checkpoint does not facilitate the transit of excisable goods).

The main directions of the government policy in the sector are the effective implementation of the agricultural strategy, provision of international quality certification infrastructure (including bringing the national standards and quality control system into conformity with international standards), introduction of quality control systems and supporting access to new markets.

–  –  –

Pharmaceutical industry is one of the fastest growing exporting sectors in Armenia. Export accounts for 57 percent of output and average annual export growth has been 24 percent (starting from 2003).

Absence of GMP certification is among the key challenges facing the industry.

Government support to this sector will include assistance in introducing quality certification systems, quality control, ensuring access to finance, activities to attract transnational companies to Armenia and other tools.

–  –  –

8. Main areas of the tradable sector at the start phase The jumpstart strategy includes pre-identification of key sectors of focus for start-up of the relevant industrial policy and implementation of sectoral strategies. If implementation of the jumpstart strategy is successful, the adopted policy will be implemented for other sectors as well.

Synergies between sectors will contribute to increased influence of initiatives along with priority directions already declared by the Government. In this regard, it is viewed as one of the important factors during the selection of sectoral focal points.

The following sectors set as priorities by the RA Government are key to sectoral sequencing of this strategy, where sectoral development strategies have been improved or key initiatives are being

implemented:

Information and Communication Technologies Tourism Healthcare Education Agriculture

Selection of sectoral priorities for jumstart strategy is based on three fundamental principles:

Contribution to export diversification, as it is a priority for Armenia to develop and maintain other exporting sectors parallel to metal mining and metallurgy.

Opportunity for cluster development, as international competitiveness of a sector of the economy depends on the existence of clusters and the degree of its maturity Focusing interventions for efficiency purposes, as focusing interventions with limited resources and gaining maximum synergies is a significant prerequisite for efficient use.

In addition to fundamental principles, the following factors have been considered when setting

sectoral priorities:

1. Current export capacity

2. Absence of raw material bottlenecks in the medium term Diaspora’s involvement or its potential 3.

4. Opportunities to create higher value added in the long run

5. Number of firms in the sector

6. Opportunities to attract foreign investment

7. Impact on employment and regional development





8. Opportunity to develop differentiated value proposition This approach resulted in considering manufacturing sectors and other related sectors of economy within the context of consistent development, as corresponding complexes (clusters). Currently, resource based products and services prevail in the economy and export composition. In the next phase of development, most growth will occur in skills-based sectors, and subsequently, knowledgebased sectors.

1. Resource-based sectors include food production (particularly brandy-making, canned food production, wine-making, mineral water production, juice production, fish-breeding, fruit and vegetables), metal and non metal minig and their processing production, tourism and related cultural products;

2. Skills-based sectors include diamond cutting, jewelry manufacturing, watch manufacturing, pharmaceuticals, light industry(particularly textile industry), health services, sanatoria, medical equipment and materials;

3. Knowledge-based sectors include precision engineering (machine-building, instrumentmaking, electrical and optical production), information technologies, engineering services, applied physics and biotechnologies.

In the jumpstart strategy, the priority target sectors of processing industry are differentiated by time horizons which entails respective application of support tools and interventions.

Horizon 1.Scaling-up the current capacity (2011-2013): This includes sectors with growth potential, established export markets and the biggest export volumes in recent years, with possibilities to increase production volumes with moderate capital investment.

The policy in this regard will be targeted at export promotion and swift removal of obstacles to development.

Horizon 2.Develop emerging capacities/sectors (2011-2015): This includes those sectors that have grown dynamically in recent years but do not exceed USD 10 mln in export volume.

The policy in this regard will target attracting larger-scale investment, addressing systemic problems and developing manufacturing/export capacities.

Horizon 3.New drivers for growth (2011-2020): New sectors or sectors with fragmented capacityprimarily knowledge and technology intensive sectors.

These sectors will require a broader policy with an emphasis on technology transfer and stimulating innovation.

The launch of the strategy will begin by the implementation of one of sectoral strategies from each horizon, particularly precision engineering, pharmaceuticals and brandy-making, simultaneously taking actions towards the development of other sectoral strategies identified in the jumpstart strategy.

9. Strategy Implementation and Structures The strategy considers coordination and concordance in public and private activities, as well as in various initiatives implemented in different economic sectors.

The main structures and boards to implement the strategy are the following:

1. Industrial Board by the Prime Minister (hereinafter, Industrial Board)

2. Ministry of Economy of RA

3. Sector Strategy Boards

4. Armenian Development Agency.

1. INDUSTRIAL BOARD BY THE PRIME MINISTER

In order to ensure the implementation of the Export-Led Industrial Policy and coordinate the activities of other state bodies, an Industrial Board will be set up adjunct to the Prime Minister. The Industrial Board is the supreme body coordinating the implementation activities of the strategy. It will provide effective solutions to issues related to the implementation of the strategy.

The main functions of the Industrial Board are the following:

• Submission of recommendations to state bodies, sectoral boards and other key stakeholders for the purpose of implementing interventions outlined in the strategy,

• Discussion and approval of the reports on the outcomes of the Strategy implementation

• Discussion and approval of action plans within the framework of the Strategy, as well as outlining further interventions.

The sessions of the Industrial Board are convened four times annually. As required, special sessions of the Industrial Board may be convened.

Board Composition:

RA Prime Minister – the Board Chairman 1.

2. The Minister of Economy of RA

3. Adviser to RA President on economic issues

4. The Minister of Finance of RA

5. Head of RA State Revenue Committee

6. The Minister of Agriculture of RA

7. The respective official in the Ministry of Economy of RA responsible for Industrial Issues Executive Secretary of the Board

8. General Director of ADA

9. President of UMB(E)A (by consent)

10. President of CCI of RA (by consent)

11. Heads of sector associations or unions(on rotational basis)

12. Donor organization representative (by consent)

2. THE MINISTRY OF ECONOMY OF RA

RA Ministry of Economy is the key responsible for elaborating and implementing the industrial

policy and carries out the following functions in this framework:

• Elaborating industrial policy

• Promoting interests of the industrial sector in state initiatives

• Ensuring the submission of report on the implementation process to the Industrial Board

• Ensuring the organization of annual review process of the Strategy and submission of recommendations on required amendments to the Industrial Board

• Coordinating the activites with the donor organizations within the framework of projects related to private sector development

• Ensuring the presentation of sector issues to stakeholders.

3. SECTOR STRATEGY BOARDS

Synchronization of actions and a close cooperation between public and private sectors are the guarantee for success and effectiveness of the policy and sector strategies. In this regard, the State will actively engage key stakeholders of the sectors (business unions, sector and professional associations, educational and research organizations, companies, etc.) in the processes of planning, decision-making and evaluation of results. For this purpose, Sector Strategy Boards will be set up which will serve as a platform for the coordination of activities and for professional dialogue between public and private sectors.

Members of the Sector Strategy Boards Sector strategy boards will include stakeholders from state authorities, as well as from academic and

educational institutions and business sector representatives. The Boards will include:

● The representative(s) of RA Ministry of Economy ● Sector Manager (ADA) –the Secretary of the Sector Strategy Boards ● Branch ministry representative ● Sector representatives: top level management representatives of companies and sector business unions ● Representatives of higher educational institutions and leading research structures The main principle for setting up Sector Strategy Boards is to ensure the maximum representativeness of the private sector. The union or a representative appointed by private sector may represent the interests of the sector in the Boards, by the consent of private sector representatives.

The representatives of donor organizations, other state bodies and financial organizations may participate in the Boards upon invitation status depending on the framework of discussed issues.

Functions The main objective of the Boards is to ensure the constant dialogue among all key stakeholders.

The functions are:

• Approval of sector strategies

• Discussion and approval of the annual action plans and key performance indicators based on the sector strategies

• Discussion and approval of the performance report on annual action plan

• Discussion and submission of the recommendations on the amendments in the sphere of sector regulations to the Industrial Board

• Ensuring constant feedback on new opportunities and related issues.

Decision Making The establishment of the Board, the main initiatives of the strategy and its launch are fixed in the memorandum signed between the RA Government and the representatives of the private sector.

In the process of decision making, priority will be given to the principle of overall consensus.

Convening the Sessions Board meetings are convened at least once in two months in the first year, and once in 3 months in the next years. As required, special meetings maybe convened by the initiated sector representatives or by the Ministry of Economy.

4. ARMENIAN DEVELOPMENT AGENCY



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