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LIFE IN NAKHICHEVAN AUTONOMOUS REPUBLIC: A descriptive study of social and economic conditions
Supported by UNDP/ILO
Ayse Kudat Senem Kudat Baris Sivri Social Assessment, LLC July 15, 2002
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TABLE OF CONTENTS
Summary and Next Steps Preface
Characteristics of the Region History
Governance Demographics Household Demographics and Employment Conditions
Employment/ Unemployment
Education
Economic Assessment
Government Expenditures NAR’s Economic Statistics Household Expenditure Structure Income Structure Housing Conditions Determinants of Welfare
Agriculture Sector in NAR Water Electricity Financing Feed for Livestock Magnitude of Land Holding Subsidies Markets NAR Region District By District
Infrastructure Sector
Energy Power Generation Natural Gas Project Water Supply Transportation
Social Infrastructure
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Health Education
Enterprise Sector
People’s Priorities Issues Relating to Income Generation Trust and Vision Money and Banking
Community Development
ARRA Damage Assessment for the Region
Other Donor Activities
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Summary and Next Steps
The 354,000 people who live in the Nakhichevan Autonomous Republic (NAR) present a unique development challenge for the Government of Azerbaijan and for the international community. Cut off and blockaded from the rest of Azerbaijan as a result of the conflict with Armenia, their traditional economic structure and markets destroyed by the collapse of the former Soviet Union, their physical and social infrastructure hampered by a decade or more of lack of maintenance and rehabilitation funding, NAR’s present status is worse than much of the rest of the country and its prospects for the future require imagination and innovative thinking. This report deals with the challenges of NAR today and what peoples’ priorities are for the future. The next phase of the UNDP assignment will be to chart the options for the future and propose through a participatory process a specific program of actions to liberate the people of NAR from the constraints imposed on them by the past and by the blockade which has cut them off from the rest of their country.
The people of NAR are well-educated, 75% living in rural areas, in a climate that requires irrigation to sustain most agricultural activities. The markets for NAR’s traditional agricultural products – wine, grapes, tobacco, and fruits – largely disappeared with the collapse of the former Soviet Union, and the Armenian blockade has either slowed the opening of new markets or made expensive the supply of critical inputs, including electricity, that would allow the region to move to new products. Agriculture is now largely for self-sufficiency although there has been some production for export such as sugar beets. If agriculture has had a difficult time re-establishing NAR’s traditional agricultural advantages, industry has been decimated with production essentially collapsing and many people engaging in informal trading with Iran and Turkey and others migrating either seasonally or permanently outside the region to send back money to families.
Poverty assessments of Azerbaijan as a whole and both quantitative and qualitative work on poverty in NAR show that the region is among the poorest in the country for those who permanently reside there. Indeed, data indicate that as many as 88% of NAR residents are either poor or very poor. In addition, there is little room for regional assistance since 75% of the region’s budget is subsidized by the national government and its imports, 75% of which comes in the form of electricity, is more than twelve times its exports.
While NAR has not been a focus of donor attention, there is considerable evidence that small-scale projects that have been funded, especially in community development and water supply, have been successful and could be scaled up. It is also clear that the dynamism of the population has been shown in creating new opportunities in informal trading and some areas of agriculture that people themselves feel could be substantially expanded with limited external assistance, especially in sugar beets, vegetable oil and some areas of fruits and vegetables. In terms of physical infrastructure, a survey of
58 59 peoples’ priorities undertaken especially for this study showed that roads are currently the highest priority followed by water supply and sewerage and the provision of reliable electricity. Improvements in health area the highest priority for social infrastructure. In agriculture, further investments in livestock, particularly in the new areas of small livestock, appear to be the highest priority while on the urban size investments for home improvements and small commerce activities are dominant.
A district by district assessment concentrating on agriculture also shows a number of areas where people feel modest investments could have high pay- offs in terms of improving income and household welfare.
The next phase of the consultants work will take this assessment of the current status along with peoples’ priorities and, in a participatory process that includes looking at international best practice, establish a strategy and program of activities that will improve the lives of the people of the region.
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Preface
The Nakhichevan Autonomous Republic (NAR), an enclave of 354,000 people cut off from the rest of Azerbaijan as a result of conflict with Armenia, presents unique challenges to overcome its blockaded status, its overall poverty and inadequate social and physical infrastructure, and its lack of access to more traditional means of participating in Azerbaijan’s economic development.
The United Nations Development Program (UNDP), recognizing the special challenges of assisting the people of Nakhichevan, is funding this pre-feasibility assessment, a two-phase investigation of economic and social challenges and strategies for the futures. The investigation is unique in that its qualitative and quantitative primary data collection and participatory discussions with key stakeholders is combined with the overall framework of development priorities and programs for Azerbaijan as a whole to produce a specific program of assistance to meet the special needs of the people of Nakhichevan.
Phase I, the subject of this report, focuses on data collection and analytical work on the data. The data collection comprises extensive field research in NAR, semi-structured interviews with local population and focus groups in key locations. In addition, systematic needs assessments surveys were conducted based on a representative sample of economic micro-regions with NAR. More specifically, the data collection efforts focused on the following areas:
• Labor and socio-economic conditions in NAR: population trends, employment and unemployment, household income and expenditures, sources of income, gender issues, etc; • Access to social services and infrastructure: in particular, health care, education, electricity, and telephone/communications; • Economic development: industry, internal and external trade (including formal and informal activities as well as cross-border trade, with a special emphasis on agriculture given the 72% of the population that lives in rural areas; and • Peoples priorities, expectations, and perceptions as expressed in surveys done specially for this assignment with individuals, households and industries as well as surveys done previously by Government and development agencies.
Phase II, building on the data and needs/preferences from Phase one, will focus on: (i) further in-depth study of the socio-economic situation of people in NAR; and (ii) the preparation of a set of recommendations for the development of a targeted socio-economic strategy. Phase II will identify areas of socio-economic interest and concern and propose a framework for the implementation of a comprehensive program of socio-economic development of NAR that could be pursued by the region itself, by the
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Government of Azerbaijan, and by the international donor community. Phase II will concentrate its attention on: • Assessment of potential population groups which can benefit from a comprehensive socio-economic development program in NAR; • Identification of the institutional mechanisms and policy framework required for the implementation and coordination of the program at the local, regional and national levels in both the public and private sectors.
Phase I details the current socio-economic situation of NAR and what people feel about their situation. Phase II builds on Phase I and provides options for moving forward proactively into the future.
All quantitative surveys were carried out by the Azerbaijan State Statistical Committee with funds made available through this project. Other sources of funding were also available for the 2001-2002 Budget Survey.
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Characteristics of the Region
The Nakhichevan Autonomous Republic (NAR) is an enclave between the Islamic Republic of Iran, Turkey, and Armenia, which has no border with Azerbaijan proper.15 68 percent is mountainous, and 50 percent is 1,000-2,000 meters above sea level. Irrigated lands comprise more than 80 percent of the agricultural area in the NAR; only 33.2 percent of all land is suitable for agriculture.
According to the results of the 1999 census in NAR, the population is 354,000. Of these, 99,600 (28.1 percent) live in urban areas, and 254,500 (71.9 percent) live in rural areas. Men make up 49.3 percent (174,500 people) and women make up 50.7 percent (179,600) of the total population.
The Nakhchivan Autonomous Republic is a land of mountains. Located southwest of the main part of Azerbaijan, NAR occupies the southern slopes of the Daralagez and the south-western slopes of the Zangezur mountains. A chain of volcanic domes stretches along the plains, beside the Ilanlidagh mountains (2385 m.). There are frequent earthquakes occasionally as severe as magnitude of eight, especially in the Ordubad and Julfa districts.
NAR is rich with minerals, especially marble, lime and gypsum. Deposits of rock salt are found in the Nehram, Nakhchivan and Sustin districits. There is an abundance of mineral springs, for example, in Badamli, Sirab, Nagajir, and Kiziljir.
The climate of NAR is continental with temperatures running between +43 in summer to - 30 in winter. Despite being considerably above sea level, the humidity is very low in the territory. There is very little precipitation (200 - 300 mm) in the Pre-Arazian Plain, where semi-arid conditions prevail. The lack of moisture is felt in the mountains as well. The slopes are covered with thorny thickets, although one can find sub-alpine and alpine meadows in parts of the Zangezur and Daralagez chains. There are over 100 forms of medicinal, ether-oil, rubber-bearing, and honey-producing plants.
In addition to the Araz River, there are about 40 small rivers. The intensive rainfalls that often follow long periods of drought frequently lead to destructive floods. The region’s water levels. Only the territory lying to the eastern part of Gilanchay generally has sufficient water, whereas the Pri- Araz plain is almost arid. Not far from the mineral springs there are a number of small lakes located in alpine meadows.
History
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The Nakhichivan Autonomous Republic (NAR) is the most ancient part of Azerbaijan with a rich history and cultural monuments. Some form of Nakhichivan appears to have existed as a city for 3,500 years. Some historians propose that the word Nakhchivan was derived from Turkish and means "agh aranlar" (white wise men). More recently, once they came into power, the Bolsheviks established Nakhchivan Soviet Socialist Republic in July of 1920, and declared it to be a part of the Azerbaijan Soviet Socialist Republic. Since then, Nakhchivan has gone through a series of forms16 within the Soviet Union until the USSR’s break-up.
More substantially with regard to its neighbors, during the Moscow and Gars Treaties conducted in Moscow, it was resolved that Nakhchivan would be annexed to Azerbaijan. The Moscow and Gars Treaties played a key role in protecting the Nakhchivan territory. In the Soviet-era, some of Nakhchivan’s territory was annexed to Armenia, and Nakhchivan was prevented from establishing cultural, economic and political relations with Turkey.
The Azerbaijan Republic and its integral part⎯Nakhchivan Autonomous Republic – made various attempt to gain autonomy and finally independence from the former Soviet Union in the late 1980s. At the same time, as the former USSR began its process of eventual disintegration, traditional conflicts re-emerged, ignating clashes between Azerbaijan and Armenia.
To suppress the Azeri independence movement the Soviet Amy marched into and attacked Baku on January 19, 1990. After the attack on Baku, a force of combined Russian-Armenian troops captured the Karki village in Nakhchivan AR and began to attack along the border.
The Nakhchivan Autonomous Soviet Republic referred to the Moscow and Gars Treaties, but failed to secure a guarantee for border protection and feared a more general invasion from Armenia; at that point, the Supreme Soviet of the Republic of Nakhchivan passed a decree to leave the USSR.
Mr.Heydar Aliyev was elected as a parliamentary deputy of Azerbaijan and Nakhchivan, and in September, 1991 he accepted the position of chairperson of the Supreme Assembly of the Nakhchivan Autonomous Republic. Under Heydar Aliyev's leadership the Nakhchivan parliament began to initiate actions to move closer to the rest of Azerbaijan and to survive worsening relations with Armenia. In this situation, a high priority was improving relations with Iran and Turkey so NAR could survive when Armenia blockaded NAR access to the rest of Azerbaijan.. In 1992 an Azerbaijan - related protocol was signed by NAR, Turkey and Iran, with the
16 • March 1921: Nakhchivan Soviet Socialist Republic; • June 1923: Nakhchivan Province; • February 1924: Nakhchivan Autonomous Soviet Socialist Republic; • November 1990: Nakhchivan Autonomous Republic.
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purpose of building bridges over the Araz River to improve NAR’s external transportation options.
Specific measures were taken to ensure security and safety of Nakhchivan AR. For the first time a cease-fire agreement was signed between the Armenian Republic and the NAR.
Political tensions in Nakhchivan in the late 1980s and early 1990s were more the result of attempts to assert independent political power, rather than a product of ethnic politics, given that by 1989, virtually all of the Armenian population of Nakhchivan had gone to Armenia. Following Azerbaijan's independence in 1991 the region remained an autonomous republic within Azerbaijan with its own constitution, government, parliament and judiciary. The NAR authorities had competence for policy in areas such as local taxation, economic development, social security, environmental affairs, health, tourism and culture. During Abulfaz Elchibey's presidency of Azerbaijan, Nakhichevan, led by Heydar Aliyev, attempted to establish a greater degree of independence, before Aliyev took power in Baku itself. In this respect it is notable that Azerbaijan's last two presidents, Abulfaz Elchibey and Heydar Aliyev both originate from NAR.
Governance
As a result of the 1995 Constitution of the Azerbaijan Republic, the NAR is an Autonomous State within the territory of Azerbaijan. The new Constitution of the Nakhchivan Republic was passed in 1998. NAR consists of six districts: Ordubad, Julfa, Shahbuz, Babek, Sharur, Sadarak and has its own Parliament, Cabinet of Ministers and Supreme Court. The Chairperson of the Supreme Assembly is NAR’s chief resident official.
The management system in the Nakhchivan AR is similar to that in the Republic of Azerbaijan. NAR’s regional and urban territorial units are run by heads of the executive powers who are appointed by the President of the Azerbaijan Republic on the recommendation of the Supreme Assembly of the Nakhchivan Autonomous Republic, the 45-member Ali Majlis. The Ali Majlis, which sits for a term of five years, deals with issues which, according to Constitution and laws of Azerbaijan, fall under its competence, primarily concerning.
• elections; • taxes; • NAR’s economic development; • social maintenance; • environmental protection; • tourism; and • protection of health, science and culture.
In particular, the Ali Majlis deals with the:
• approval of NAR’s budget and economic and social programs; • appointment and dismissal of NAR’s Prime Minister; and
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• approval of the composition, and dissolution, of NAR’s Cabinet of Ministers;
The NAR Cabinet of Ministers:
• prepares the NAR draft budget for presentation to and approval by the Ali Majlis; • implements the budget, including economic and social programs; and • settles other questions delegated to it by the President of the Azerbaijan Republic.
Demographics
Nakhichevan has a very young population with an average age of 26. More than half (56%) of the total population is at employment age and 36% is below. The total number of females is slightly higher than males and so is the average age of females (27 vs. 25). Almost 75% of the entire population is rural; there are no significant demographic differences between the urban and rural populations.
Figure 1.a
Figure 1.a: Population Distribution (1000 people)
300 250 200 150 100
1000 people 1000 50 rural 0 urban 1991 urban rural 2001 year
Source: Azerbaijan Census 2000
There has been some change in the urban/rural split since 1991 when 29.5% lived in urban areas – this figure had decreased to 26.25 in 2001. According to qualitative survey results, this happened because urban factories were shut down and urban dwellers were able to benefit from privatization of land in rural areas.17
Figure 1.b
17 There is some evidence that some urban inhabitants have remained in urban areas but registered as rural inhabitants in order to benefit from privatization of agricultural land.
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Figure 1.b: Urban versus Rural Population
300000
250000 200000
150000
100000
50000 Rural Population Urban Population 0 NakhichevanSederek (Total) RayonSherur RayonBabek Rayon NakhichevanShahbuz City RayonCulfa RayonOrdubad Rayon
Figure 1.b shows the detailed layout of the urban population versus rural population in Nakhichevan Rayons.
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Figure 1.c
Figure 1.c: Average Household Size
6 5 4 3
2
1 Rural Population Urban Population 0 Nakhichevan (Total)Sederek RayonSherur Rayon Babek Rayon Nakhichevan CityShahbuz RayonCulfa Rayon Ordubad Rayon
Average Household size in rural and urban areas are similar in each rayon except Nakhichevan Cith and Sederek Rayons as shown in the Figure 1.c
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Household Demographics and Employment Conditions
The household demographic and employment conditions are shown in Table 1. Accordingly, most households have 4-5 people living together and have two of them engaged in an economics activity—often in agriculture and livestock management.
Table 1
Total population of the Number of Household Employment household households Household size 1 person 2 3 4 5 6 7 8 9 10 All households 354072 71235 4875 4671 7214 13847 16350 11031 5293 2984 1834 3136
Economically active households 338807 65060 2378 3219 6467 13262 15891 10769 5201 2951 1815 3107 number of economically active people 1 68316 17881 2378 2044 3003 3942 3655 1922 568 201 88 80 2 138025 28494 0 1175 2935 7639 8865 5052 1759 639 232 198 3 52990 8898 0 0 529 1303 2198 2048 1291 727 396 406 4 37512 5320 0 0 0 378 924 1235 932 683 522 646 ' 5 + 41964 4467 0 0 0 0 249 512 651 701 577 1777 Employed households 328450 62788 2261 3027 6170 12743 15339 10425 5077 2900 1776 3070 number of employed people 1 80305 19882 2261 2010 3124 4415 4255 2401 778 307 154 177 2 130402 26463 0 1017 2618 6903 8141 4738 1774 695 289 288 3 50057 8200 0 0 428 1133 1971 1851 1218 714 410 475 4 32883 4579 0 0 0 292 787 1024 789 619 443 625 ' 5 + 34803 3664 0 0 0 0 185 411 518 565 480 1505 Unemployed households 44265 7739 117 296 660 1446 1755 1379 729 438 314 605 number of unemployed people 1 26800 5104 117 242 519 1089 1246 874 394 232 142 249 2 10582 1775 0 54 126 310 410 335 203 108 80 149 3 3911 529 0 0 15 44 70 120 80 50 46 104 4 1638 203 0 0 0 3 24 39 38 23 32 44 5 + 1334 128 0 0 0 0 5 11 14 25 14 59
Source: Azerbaijan Census 2000
A small number of people live alone, and surprisingly fewer older than younger people do not share their living with others (Tavruz??). The traditional family structure is in place and shelters the old age people. This situation, in transition, also helps the households through pension incomes of older people, although the relevant incomes are low.
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Table 2 Number of one person households in age groups Total Male Female Urban Male Female Rural Nakhichevan 4719 2322 2397 1961 1091 870 2758
16 27 16 11 21 10 11 6 17 34 22 12 28 17 11 6 18 28 20 8 19 13 6 9 19 56 48 8 36 32 4 20 16-19 145 106 39 104 72 32 41 20-24 580 516 64 332 292 40 248 25-29 531 441 90 195 141 54 336 30-34 435 315 120 187 125 62 248 35-39 419 260 159 198 118 80 221 40-44 325 179 146 170 110 60 155 45-49 214 96 118 116 57 59 98 50-54 137 53 84 69 32 37 68 55-59 179 45 134 91 27 64 88 60-64 406 85 321 133 40 93 273 65-69 467 90 377 129 23 106 338 70-74 428 79 349 136 36 100 292 75-79 210 32 178 55 12 43 155 80-84 93 12 81 26 3 23 67 85-89 77 10 67 13 2 11 64 90-94 37 1 36 4 0 4 33 95-99 27 1 26 3 1 2 24 100 and over 9 1 8 0 0 0 9 At Economically active age 2941 2060 881 1457 1001 456 1484 Over economically active age 1778 262 1516 504 90 414 1274 Source: Azerbaijan Census 2000
Employment/Unemployment
The table below, based on the Census 2000, examines NAR’s rate of unemployment in terms of geographic location and gender. Unemployment peaks in the age group between 25-29, among male respondents both in urban and rural areas. Having said that, the unemployment levels remain in the double digits for most of the population until the age group of 50-54 (Table 3).
Table 3
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Unemployment by age and gender age groups 70 and 16-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 over
TOTAL 6.21% 14.16% 14.23% 12.84% 12.97% 11.32% 10.21% 7.50% 5.31% 2.73% 2.68% 5.07%
male 5.70% 16.91% 18.20% 15.01% 15.01% 13.54% 12.10% 9.81% 6.31% 2.61% 2.39% 4.23%
female 6.73% 11.44% 10.35% 10.79% 11.02% 9.21% 8.43% 5.42% 4.49% 2.82% 2.93% 5.67%
urban 6.52% 17.92% 20.51% 19.36% 18.97% 15.54% 13.84% 9.93% 9.62% 4.49% 5.52% 11.43%
male 5.91% 20.73% 25.47% 22.15% 23.37% 18.13% 15.90% 11.77% 10.05% 4.32% 4.49% 11.51%
female 7.15% 15.16% 16.27% 16.86% 14.93% 13.15% 11.88% 8.11% 9.22% 4.62% 6.33% 11.38%
rural 6.52% 13.91% 13.23% 11.29% 11.43% 10.10% 9.04% 6.82% 4.23% 2.62% 2.49% 3.84%
male 5.98% 16.75% 17.24% 13.30% 12.60% 12.25% 10.84% 9.38% 5.28% 2.41% 2.36% 2.67% female 7.07% 11.10% 9.15% 9.37% 10.29% 8.03% 7.35% 4.64% 3.41% 2.77% 2.59% 4.70%
Source: Azerbaijan Census 2000
While unemployment is a major problem overall, it is even more serious in urban areas. Coupled with the finding that rural areas are poorer than urban areas, this shows that the added value of the agricultural products in Nakhichevan is low, a finding that is substantiated by others. The official employment statistics largely underestimate the high levels of open and hidden unemployment and underemployment that prevails in both the rural and urban areas of the Autonomous Republic. The official employment profile is shown in Table 4.a, based on 2000 Census.
Table 4.a Unemployment by age group, NAR
(Age distribution of people in economically active age) Employed Unemployed Age groups 16-19 7408 829 20-24 19697 2086 25-29 22480 2082 30-34 24563 1997 35-39 23836 1962 40-44 17844 1270 45-49 10509 684 50-54 4710 270 55-59 2710 192 60-64 1789 160 65-69 726 120 70-74 and over 326 127 Source: Azerbaijan Census, 2000
Table 4.b
Labor Force Participation Sector Rural Urban State administrative office 3% 6%
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State industrial enterprise 1% 2% Education 5% 8% Health care 2% 4% The army 1% 3% Farming 16% 0% Private industrial enterprise 3% 11% Houseworker 13% 18% Retired 19% 17% Student 1% 2% Invalid 2% 0% Not working temporarily due to health problems 1% 1% Unemployed (registered) 0% 5% Unemployed (not-registered) 10% 16% Other 22% 7% Source: 2002 People’s Priority Survey
According to the representative survey of People’s Priority, the retired populations in both rural and urban areas are substantial and many women merely classify themselves as houseworkers.
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Education
There is no significant overall difference between education levels in terms of geographic location, a typical finding given the high priority the USSR gave to educating the population (Table 5). However, when the high school level, the education level that is the most common in Nakhichevan, is considered, rural residents seem to fare better than the urban population. On the other hand, urban residents seem to have prefer “Teknikom” (technical education) to classical high school education. Both the high and the low ends of the education level (university vs. illiteracy) are rare. In fact only 0.33% of the population is university graduates and 1.4% are illiterate. As indicated in the table prepared based on 2000 Census data, gender differences in educational attainment is visible in NAR as a whole, as well as in the individual sub-regions (Table 5).
Table 5: Higher Education in NAR
Universit High y Teknikom School TOTAL 0.33 5.96 49 male 0.4 6.97 46.87 female 0.27 4.99 51.04 URBAN 0.71 10.67 42.04 male 0.8 10.79 39.66 female 0.63 10.56 44.29 RURAL 0.24 4.77 50.75 male 0.3 6.01 48.66 female 0.18 3.57 52.76
Source: 2002 People’s Priority Survey
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Table 6: Education in NAR by sub-region (Source: Azerbaijan Census 2000)
Teknikom( 11years+2 Illeterates years or 2 High 9 years +2 of age 10 Higher years 6 School years at and over Total Education University months) (11 years) 9 years teknikom 4 years Literates Illeterates years Nakhichevan AR 309,311 20,146 1,254 20,435 148,324 34,526 4,528 39,895 35,878 4,325 1,118 male 151,296 12,719 709 11,323 69,343 15,491 3,286 18,860 17,681 1,884 186 female 158,015 7,427 545 9,112 78,981 19,035 1,242 21,035 18,197 2,441 932 urban 84,693 9,769 719 9,723 34,335 8,129 1,687 9,921 9,283 1,127 281 male 40,978 5,454 383 4,688 15,663 3,832 1,091 4,862 4,511 494 41 female 43,715 4,315 336 5,035 18,672 4,297 596 5,059 4,772 633 240 rural 224,618 10,377 535 10,712 113,989 26,397 2,841 29,974 26,595 3,198 837 male 110,318 7,265 326 6,635 53,680 11,659 2,195 13,998 13,170 1,390 145 female 114,300 3,112 209 4,077 60,309 14,738 646 15,976 13,425 1,808 692 Sadarak Rayon 10,559 227 11 196 6,089 1,285 40 1,314 1,084 313 147 male 5,254 202 10 163 2,918 622 32 667 539 101 14 female 5,305 25 1 33 3,171 663 8 647 545 212 133 urban 0 0 0 0 0 0 0 0 0 0 0 male 0 0 0 0 0 0 0 0 0 0 0 female 0 0 0 0 0 0 0 0 0 0 0 rural 10,559 227 11 196 6,089 1,285 40 1,314 1,084 313 147 male 5,254 202 10 163 2,918 622 32 667 539 101 14 female 5,305 25 1 33 3,171 663 8 647 545 212 133 Sherur Rayon 95,903 4,765 210 5,206 47,523 11,299 1,181 12,745 11,654 1,320 280 male 46,528 3,167 128 3,162 22,073 4,895 905 5,913 5,708 577 31 female 49,375 1,598 82 2,044 25,450 6,404 276 6,832 5,946 743 249 urban 5,883 554 16 639 2,424 676 75 765 678 56 21 male 2,880 336 13 288 1,116 308 45 405 347 22 2 female 3,003 218 3 351 1,308 368 30 360 331 34 19 rural 90,020 4,211 194 4,567 45,099 10,623 1,106 11,980 10,976 1,264 259 male 43,648 2,831 115 2,874 20,957 4,587 860 5,508 5,361 555 29 female 46,372 1,380 79 1,693 24,142 6,036 246 6,472 5,615 709 230 Babek Rayon 61,828 2,733 184 2,964 30,706 6,775 1,053 9,088 7,506 819 274 male 30,396 1,821 115 1,665 14,669 3,034 791 4,159 3,794 348 57 female 31,432 912 69 1,299 16,037 3,741 262 4,929 3,712 471 217 urban 2,442 122 6 170 1,322 184 13 278 295 52 27 male 1,172 68 4 84 640 76 8 142 132 18 4 female 1,270 54 2 86 682 108 5 136 163 34 23 rural 59,386 2,611 178 2,794 29,384 6,591 1,040 8,810 7,211 767 247 male 29,224 1,753 111 1,581 14,029 2,958 783 4,017 3,662 330 53 female 30,162 858 67 1,213 15,355 3,633 257 4,793 3,549 437 194 Nakhichevan City 56,228 7,545 634 7,371 21,097 5,133 1,292 6,386 5,975 795 184 male 27,004 4,040 327 3,448 9,531 2,495 832 3,080 2,904 347 25 female 29,224 3,505 307 3,923 11,566 2,638 460 3,306 3,071 448 159 urban 56,228 7,545 634 7,371 21,097 5,133 1,292 6,386 5,975 795 184 male 27,004 4,040 327 3,448 9,531 2,495 832 3,080 2,904 347 25 female 29,224 3,505 307 3,923 11,566 2,638 460 3,306 3,071 448 159 rural 0 0 0 0 0 0 0 0 0 0 0 male 0 0 0 0 0 0 0 0 0 0 0 female 0 0 0 0 0 0 0 0 0 0 0 Shahbuz Rayon 17,827 1,242 28 972 8,870 2,207 219 2,246 1,850 193 54 male 8,819 871 15 562 4,192 994 165 1,048 893 79 14 female 9,008 371 13 410 4,678 1,213 54 1,198 957 114 40 urban 2,250 285 6 241 923 190 60 273 259 13 3 male 1,093 176 4 123 417 76 37 132 123 5 1 female 1,157 109 2 118 506 114 23 141 136 8 2 rural 15,577 957 22 731 7,947 2,017 159 1,973 1,591 180 51 male 7,726 695 11 439 3,775 918 128 916 770 74 13 female 7,851 262 11 292 4,172 1,099 31 1,057 821 106 38 Julfa Rayon 31,064 1,746 57 1,917 15,327 3,432 323 3,969 3,915 378 66 male 15,462 1,259 41 1,184 7,121 1,587 240 1,936 1,907 187 15 female 15,602 487 16 733 8,206 1,845 83 2,033 2,008 191 51 urban 8,833 631 17 713 4,105 875 103 1,125 1,152 112 22 male 4,400 416 11 397 1,931 420 73 572 527 53 2 female 4,433 215 6 316 2,174 455 30 553 625 59 20 rural 22,231 1,115 40 1,204 11,222 2,557 220 2,844 2,763 266 44 male 11,062 843 30 787 5,190 1,167 167 1,364 1,380 134 13 female 11,169 272 10 417 6,032 1,390 53 1,480 1,383 132 31 Ordubad Rayon 35,902 1,888 130 1,809 18,712 4,395 420 4,147 3,894 507 113 male 17,833 1,359 73 1,139 8,839 1,864 321 2,057 1,936 245 30 female 18,069 529 57 670 9,873 2,531 99 2,090 1,958 262 83 urban 9,057 632 40 589 4,464 1,071 144 1,094 924 99 24 male 4,429 418 24 348 2,028 457 96 531 478 49 7
Economic Assessment
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The most important overall economic expenditures with regard to peoples’ welfare and opportunities for the future concern those provided by the public sector, international trade and households. This section deals with these three themes.
Government Expenditures
The Nakhichevan government has different departments which deal with decisions regarding the economic program, environmental protection, tourism, health, education and social protection. The key determinant of the size of NAR’s public expenditures is the decision on budget levels by the national Government. The total annual budget of the Nakhichevan Autonomous Republic in 1996 was 34 billion manats in 1996 (US$ 8.3 million) and 70 billion manat in 2000 before increasing to 104 billion manats (US$ 21.6 million). 25% of NAR’s realized budget in 2000 was financed by local government revenues, primarily from taxes, and 75% was subsidized by the Government of Azerbaijan.
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Table 7
Trade – Formal and Informal. Nakhichevan AR Budget 2000 % of Realised over total Revenues Budgeted Realised Rev./Exp. Individual Income Tax 4,900 5,807 33% Corporate Tax 900 808 5% Corporate Tax from Small Business and Enterpreneurs 1,100 1,293 7% Corporate Tax from retail trade and services 150 231 1% Patent Income 400 615 4% Value Added Tax 5,000 4,713 27% Other charges 250 255 1% Special taxes 344 352 2% Land Tax 480 1,018 6% Real Estate Tax 840 980 6% Mines and natural resources Tax 97 118 1% Other Income 1,000 1,305 7% Total 15,461 17,495 100% Expenditures Supreme Meclis and Cabinet of Ministers 7,006 6,491 9% Archives 155 137 0% Education 42,471 41,794 60% Health 7,737 7,357 10% Social services 777 714 1% Culture information 3,914 3,757 5% Development and maintenance of recreational centers 217 215 0% Local communal charges 3,151 3,124 4% Agriculture 600 511 1% Law Enforcement 10 10 0% Construction 5,424 5,394 8% Other expenditures 655 571 1% Total 72,117 70,074 100% Subsidies from Azerbaijan 56,656 52,579
For the first nine months of calendar 2001, NAR imported goods and services amounting to US$25.5 million equivalent while exporting only US$2 million, resulting in a trade deficit of US$23.5 million. The largest
75 76 category of imports was electricity, amounting to US$ 19 million or 75% of total imports. Iran and Turkey were the largest trade partners of this enclave region accounting for 98% of NAR’s imports and all of its exports (Table 8).
While the electricity imported by Nakhichevan increased only 7% between the 2000 and 2001 (9 months), the weight of Turkey and Iran altered radically. In 2000, Iran provided US$13.4 million worth of electricity to the country while Turkey’s share was only US$ 4.7 million. However, as NAR was not able to pay its debt to Iran for imported electricity, Iran stopped electricity sales on credit to Nakhichevan. This prompted Turkey to step in and provide power to Nakhichevan in the form of aid. Consequently, Turkey’s electricity exports to Nakhichevan soared. Balance of payments excluding electricity was USD 2.7 million in 2000 compared to USD 4.0 million in the first nine months of 2001. In fact, Nakhichevan’s electricity consumption has been continuously (and substantially) subsidized either by the producer or by the Azeri Government after the blockage by Armenia cut off electricity/energy imports from Azerbaijan in 1991. Other important items in NAR’s imports were sugar, light machinery, transportation vehicles, basic food and construction material due to the fact that Nakhichevan does not produce many basic consumer products.
Sugar is both an export and an import. Sugar cane and spirits are the two largest items that the region exports. However, the sugar cane exported to Turkey (the biggest ticket on the country’s export portfolio amounting to US$ 1.9million) does not truly create an inflow of funds to NAR. The raw sugar cane is exported to Turkey, processed and the end product is resold to Nakhichevan. This barter scheme does not involve a significant exchange of funds. Thus, the total inflow of funds into the region is derived only from sales to Iran and amounted to only US$ 0.3 million.
Aside from Turkey and Iran, Nakhichevan largely depends on Azerbaijan for economic survival. Nakhichevan effectively imports all of its food supplies, construction materials and petroleum products from the mainland. It would not be inaccurate to state that without Azerbaijan, Nakhichevan would not be able to survive in current framework of regional insecurity and blockade.
When the export and import structure of mainland Azerbaijan is considered, it is evident that the country as a whole is almost totally dependent on mineral fuels and oil as main source of income. On the other hand, there is an explicit deficit in both agricultural and livestock/meat products. When this is coupled with the fact that peoples preferences
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in Nakhichevan are in the area of livestock and agriculture, there might be common interest for NAR to increase its production in these areas, if NAR products can be competitive with other sources of production.
Table 8
Nakhichevan External Trade as of 09/30/2001
Imports US$ Value % Iran 14,556,187 56.5% Turkey 10,743,239 41.7% Russia 206,105 0.8% USA 154,579 0.6% UAE 51,526 0.2% Sweden 20,611 0.1% Poland 10,305 0.0% Germany 7,729 0.0% Austria 2,576 0.0%
Imports by commodities US$ Value % Electricity purchases from abroad 19,359,098 75% Sugar 1,784,228 7% Light Machinery 1,332,840 5% Automobile 1,060,166 4% Trucks 603,365 2% Flour 396,047 2% Construction material 390,784 2% Misc.Food items 383,018 1% Telecommunications equipment 111,889 0% Petroleum products 85,792 0% Industrial Machinery 48,982 0% Starch 34,188 0% Cardboard 33,260 0% Meat and Poultry 27,195 0% Vegetable Oil 21,096 0% Hunting equipment 2,700 0%
Exports Border Gate US$ Iran Turkey Spirits 300,913 Sugar Cane 1,954,330
Table 9
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Nakhichevan External Trade as of 12/31/2000 Amount (in tons Amount (in tons Imports except otherwise) US$ Value except otherwise) US$ Value Border Gate Border Gate Culfa-Iran Sederek-Turkey Electricity 345,226,980 kw/hrs 13,434,060 Electricity 134,977,920 kw/hrs 4,724,227 Diesel 4,349 497,629 Vegetable Oil 20 16,066 Gasoline 24 2,158 Food items 54 141,263 Gas 208 20,801 Sugar 3211 1,367,527 Plastic boxes 11 16,981 Poultry 25 13,353 Meat 20 19,950 Turkey 37 33,060 Pasta 15 3,805 Beer 20 5,673 Rice 38 8,035 Potatoes 120 10,847 Vegetable Oil 17 102,660 Watermelon 8 2,415 Truck 46 individual trucks 161,263 Flour 1113 220,190 TV 22 144,784 Ethilene Alcohol 23 200,806 Small Stereo 13 196,258 Wheat 20 28,000 Stereo 4 129,831 Fruit concentrate 17 11,523 Automobile 20 individual cars 114,706 Plastic bottles 1.7 3,141 Trucks 77 trucks 237,436 Humaniterian Aid Automobile 7 60,689 Pharmaceuticals 7 326,720 Kitchenware 92.3 108,861 Computer 1 PC 1,800 Shoes 87.9 171,775 Construction Material 324 151,154
Humanitarian Aid Vegetable Oil 170 123,344 Flour 850 160,989 Rice 150 47,880 Pharmaceuticals 7.5
Exports Border Gate US$ Culfa-Iran Sederek-Turkey Beans 2,500 Sugar Cane 1,487,624
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Table 10
Goods flow with Mainland Azebaijan as of 12/31/2000 From Azerbaijan to NAR in tons From NAR to Azerbaijan in tons Petroleum products 247,232 Mineral water 1,884 Food supplies Salt 815 Vegetable oil 356 Fruits 669 Butter 842 Construction material 398 Rice 64 Carbon gas 325 Wheat 1,502 Tobacco 162 Flour 99 Electrode 40 Meat 315 Lime 23 Sugar 46 Beans 17 Potatoes 197 Rosehip 5 Tea 435 Other 8,655 Animal Feed 3,534 Agricultural Products 120 in pieces Construction material Electric heater -from Turkey 2,470 Brick 628 TV 1,505 Metals 1,480 Video 1,687 Wood 3,632 Automobile 26 Roof tiles 4,030 Trucks 98 Wood flooring 546 Oven 39,334 Other 10,017
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Although the official trade statistics of the region are extraordinarily modest, these numbers do not demonstrate the substantial role that cross-border commerce has in the lives of people in NAR. A significant part of the overall trading activity takes place through border crossings and goes unrecorded.18 Though it is relatively hard to assess the exact size and the impact of this type of commercial activity, one way to analyze such trading is to compare the customs and border activity that takes place. Nakhichevan has three border gates: Culfa and Sahtahti with Iran, and Sederek with Turkey.19 Among the three border gates: (i) Culfa was the busiest, recording 712,287 passengers and 226,230 pieces of luggage in the year 2000; (ii) Sederek had 158,439 passengers and 169,699 pieces of luggage; and (iii) Sahtahti had a higher number of passengers then Sederek, but a smaller number of luggage and thus implying a smaller size of cross-border trade activity. Though the luggage number is by no means an exact measure, given the small size of recorded export and import activity, and the fact that there are 1.1 million border crossings in a population of 354,000 people, informal border trade by individuals is obviously of enormous importance in NAR’s economy.
An important part of this informal trade is small trucks which transport petroleum from Iran to NAR and through NAR to Turkey. Since residents of NAR do not need visas to travel to Turkey there is an informal but economically important transport of petroleum, as well as other products within the Iran/NAR/Turkey corridor.
Table 11
Border Gates Activity - as of 12/31/2000 Airport Culfa Border Gate Iran Sahtahti - Iran Sederek - TurkeyTotals Planes % Train Bus/minibus Other Total % Bus/minibus Other Total % Total %
Number of transportation vehicles 634 1% 76 634 3,636 4,346 4% 116 116 0% 107,036 95% 112,132
Number of people 7,860 1% 45,748 26,344 640,195 712,287 64% 13,237 226,396 239,633 21% 158,439 14% 1,118,219
Number of luggages 3,536 1% 3,881 23,024 199,325 226,230 46% 5,651 81,675 87,326 18% 169,699 35% 486,791
NAR’s economic statistics.
Between 2000 and 2001, economic activity of Nakhichevan decreased about 8%. Almost 25% of the region’s economic activities is derived from Nakhichevan City itself. The largest enterprises in the city are the textiles and knitting factories accounting for 33% of the city’s production. The output from these two factories decreased almost by half throughout the year, worsening the city’s already difficult financial situation.
18. Indeed, legislation provides an incentive for such activity by permitting luggage less than 50 kilograms to pass directly without customs clearance. 19 Although NAR has one airport, it is rather inactive and serves only passengers traveling to and from mainland Azerbaijan.
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Agriculture plays a very important role in the economy and a large part of the aggregate production is agriculture based. The tomato paste factory in Nakhichevan city and the winery in Babek are the two examples of larger agriculture based industrial enterprises.
Small enterprises (with less than 50 employees) also play an important role in the economy accounting for 30% of Nakhichevan city’s economic activities which produce a substantial part of the region’s economic goods.
Household Expenditure Structure.
Regardless of whether the household is located in an urban or a rural area, food constitutes the largest expenditure for the average Nakhichevan family. Furthermore, the same trend prevails across income levels. Housing and utilities expenses are a far distant second in rural areas while alcohol and tobacco expenses are the second largest item, again overshadowed by food expenses, in urban households.
• There are various reasons why housing, water, electricity, gas and other utilities do not emerge as a large expense item. Firstly, rent expense is low due to high home ownership rates (86% in urban and 95% in rural areas20). Second, though many families use electricity extensively for heat, the bill collection rates are low and there is no penalty for failure to pay21. 80% of rural houses are heated by wood stove and 16% with dung stove while 74% of urban houses use electricity for heating while 14% are heated by gas. These numbers indicate that the above mentioned phenomenon is mainly urban. As a side note, all households have electricity while only 24% of rural and 61% of urban households have telephones – which probably explains the relative insignificance of communication expenses in the Nakhichevan household budgets.
• Both in rural and urban households, transport expenses correlate to income level. This implies that the transportation expenses are related to commercial activity and as access to market enhances so does wealth accumulation.
• Though food is the largest item in the budget across the board, the payment methods vary materially depending on the location of the household. While rural households purchase half of their food needs with cash and the other half in-kind, urban families use cash for 85% of their food and obtain only 15% of their food in-kind. In-kind payment for food is positively correlated to household income both in urban and rural areas, indicating that the wealth accumulation in Nakhichevan is mainly through land ownership.
20 Priority survey indicates that housing ownership is 86% for urban and 95% for rural areas. 21 In the event that Government moves towards higher levels of effective cost recovery in electricity this will have an enormous impact on NAR households, increasing real costs substantially.
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NAR households, according to the surveys done especially for this report, come from a variety of sources as the table shows.
Table 12 Consumption expenditure quintiles 1 2 3 4 5 Employment –cash 51% 44% 36% 28% 22% Employment -in kind 0% 0% 0% 0% 0% Agricultural and livestock – cash 16% 28% 31% 34% 35% Agricultural and livestock - in kind 6% 12% 13% 16% 17% Self employment 0% 0% 1% 1% 1% Rent 1% 1% 1% 1% 0% Property 1% 0% 0% 1% 1% Pensions 16% 8% 11% 13% 11% Scholarship 0% 0% 0% 0% 0% Benefits 4% 3% 2% 2% 1% Remittances –cash 5% 2% 2% 2% 8% Remittances -in kind 0% 0% 1% 1% 3% Other cash income 0% 2% 1% 0% 0% Other kind income 0% 0% 0% 0% 1% Source: 2001-2002 Household Budget Survey
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Table 13 Urban Consumption expenditure quintiles 1 2 3 4 5 Employment –cash 43% 47% 36% 25% 25% Employment -in kind 0% 0% 0% 0% 0% Agricultural and livestock – cash 19% 30% 27% 28% 29% Agricultural and livestock - in kind 0% 1% 9% 11% 15% Self employment 0% 0% 0% 1% 1% Rent 0% 5% 4% 6% 0% Property 0% 0% 0% 3% 1% Pensions 15% 5% 8% 9% 7% Scholarship 1% 0% 1% 0% 0% Benefits 5% 1% 1% 2% 1% Remittances –cash 15% 8% 7% 11% 14% Remittances -in kind 0% 1% 3% 1% 4% Other cash income 1% 1% 3% 1% 1% Other kind income 0% 0% 0% 1% 2% Rural Consumption expenditure quintiles 1 2 3 4 5 Employment –cash 47% 41% 33% 28% 18% Employment -in kind 0% 0% 0% 0% 0% Agricultural and livestock – cash 18% 26% 32% 35% 41% Agricultural and livestock - in kind 8% 14% 14% 17% 20% Self employment 0% 0% 2% 0% 0% Rent 0% 0% 0% 0% 0% Property 0% 0% 0% 0% 1% Pensions 19% 9% 12% 14% 15% Scholarship 0% 0% 0% 0% 0% Benefits 5% 3% 2% 2% 0% Remittances –cash 3% 4% 4% 3% 5% Remittances -in kind 0% 0% 1% 1% 1% Other cash income 0% 2% 0% 0% 0% Other kind income 0% 0% 0% 0% 0% Source: 2001-2002 Household Budget Survey
• The three main sources of income for the Nakhichevan families are employment, agricultural and livestock income and pensions. Income level and the location are again important factors in determining the weight of these factors. • The weight of employment in the aggregate income decreases as income level increases. This trend is prevalent both in urban and rural areas. There does not seem to be an income received in-kind in any of the sub categories. Yet this intuitively is challenging and it is likely that the data may be distorted due to underreporting by the survey participants. • Agricultural and livestock related income stands out as the second most important source of earnings in Nakhichevan.
Income Structure.
Employment and agricultural activities related income and pension stands out as the three main sources in Nakhichevan regardless of location.
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In addition to these three items, remittances constitute a considerable factor in urban families, especially in the highest and the lowest ends of the economic spectrum.
Both in urban and rural families’ income structure the weight of employment seems to be inversely related to income level. Coupled with the fact that agricultural income increases as overall income levels increase, this shows that land and cattle ownership are very important in determining wealth in NAR which does not have a substantial industrial sector. Agricultural income is predominantly received in cash though in-kind forms of payment become more significant as income levels increase, especially in rural households. This is another indication that the source of the agricultural and livestock income in Nakhichevan is self-owned land and cattle. The land and the livestock that are owned by Nakhichevan households provide both cash income and subsistence food.
Pensions are another important income source in Nakhichevan. The weight of pensions seems to decrease in urban households as income levels increase. Since pensions are a derivative of employment related income, this is not a surprising finding. However in rural households, the weight of pension more or less stays the same across the board. This may be due to a possible disparity between the overall income levels between the rural and urban households.
Remittances play an important role in the urban families’ incomes at the extreme ends of the spectrum. This kind of income, in fact, can be perceived as a continuation of income received via employment. The family members who work across the border in Turkey and Iran and in mainland Azerbaijan provide for their families back in Nakhichevan. In lower income families, the migration is forced by the fact that the family does not own land (Figure 2.b). The jobs that such Nakhichevan immigrants find abroad are likely to be in the informal sector and for menial work. On the other hand, the remittance income at the higher end of income levels is likely to be received through by more qualified work. This may be due to increased educational levels or connections. In addition, these remittances are likely to be derived from mainland Azerbaijan and not internationally.
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Figure 2.a
Main activity of the person who has been absent any time during last 12 months
Unemploy ed Commerc e 16% Agriculture 8% 45%
Teacher 1% Hous ew if e 2%
Other Student 23% 5%
Source: People’s Priorities Survey, 2002
People who have been absent from their home in the last 12 months mostly worked on agriculture sector usually in Turkey, Iran ,and mainland Azerbaijan.
Figure 2.b Figure 2.b: Average Land Size by Income Quintile (hectares)
1.2 1 0.8 0.6 0.4 0.2 0 1 2 3 4 5 Income Quintiles
Source: People’s Priorities Survey, 2002
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According to the priorities survey 6.4% of the total population is working outside NAR. This converts to roughly 23,000 people or 12% of the labor force. The International Organization for Migration estimates that 50,000 Nakhichevanians are living outside NAR. We believe that the cultural traits of the region causes underreporting on the number of family members living outside home. Most household heads or parents does not admit the fact that their sons are sending money home. On average 4 months is spent outside for working indicating that most of the labor outside NAR is seasonal. This is explained by the fact that most laborers unskilled and working for construction or agricultural industries which have much seasonality. Construction industry in Turkey mostly employ after the cold winter, when the climate is appropriate. Our conversations with the farm enterprises and the locals in Igdir, the border city of Turkey to Nakhichevan is also confirming this finding. In fact Igdir is one of the largest agricultural cities in Turkey with a micro- climate which is very suitable for many food and cash crops. Igdir has two harvest seasons for most crops and even three harvest seasons for some crops. This creates a sizeable demand for labor, and at a cheaper cost compared Turkish labor market hence payments are mostly in the form of in-kind.
Figure 2.c
Figure 2.c: Destination of seasonal migration
Working in Baku Absence not related to 9% work 25% Working elsew here in Azerbaijan 4%
Working in Turkey 62%
Source: People’s Priorities Survey, 2002
The distribution of the number of months absent in the last year is heavy on less than 5 months, which indicates that most of the emigrants are leaving NAR seasonally to work outside. Turkey stands out as the most frequent destination followed by Baku. 68% of the seasonal workers are absent for less than 4 months from home.
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Rent, unlike the situation in many other countries, does not seem to be a significant source of income in Nakhichevan. This is due to high home ownership levels and traditional Azerbaijani family structure in which the siblings do not leave their parents’ household easily. In the survey of peoples’ priorities, a notable number of the participants indicate that they would build/buy a house if they were given extra funds. All these facts indicate that second home ownership levels are low in Nakhichevan.
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Housing Conditions
According to the 2002 Survey of People’s Priorities, the majority of the NAR population lives in individual flats (81%) . 11% live in shared flats, 5 live in separate houses and 3% share a house. There are apartment blocks in many parts of NAR, including in rural areas.
Figure 3.a
Figure 3.a: Accomodation
600
500
400
300
Frequency 200
100
0 A separate A separate houseShared apartment Part of a house apartment Type of housing
Source: 2002 People’s Priorities Survey
While 99.7% survey participants said that they had access to electricity, it is important to consider the number of hours in the day that the electricity is actually turned on. Survey participants explained that while they had access to electricity, it was usually for an average of eight hours per day. 0.3% said that they did not have any access to electricity. In terms of access to telephone, 31% said that they have access and 69% of participants said they do not have access to telephones. Only 16% have access to sewerage systems and only 10% have access to gas supply.
Figure 3.b
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Figure 3.b: Home ownership Re nt
Ow n
Source: 2002 People’s Priorities Survey
Of the survey participants, 93% own their housing unit and 7% rent.
Figure 4
Figure 4: Access to Basic Utilities
100
80
60
40 Percent 20
0 Elec tr ic ity Telephone Sew erage Gas supply Utilitie s
Source: 2002 People’s Priorities Survey
Given that only 10% of survey participants had access to a gas supply, it is interesting to examine the alternatives that people use to meet their basic heating and cooking needs. A majority (67%) of those surveyed use wood stoves; 14% use livestock dung stoves, and another 14 % use an electric heater. 3% have gas stoves, 1% diesel oil stove, 0.4% have central heating and 0.3% gas cylinder (tank) heater.
Figure 5
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Figure 5: Percent who own stove or heater Electric Heater Gas Cylinder Central Heating (Tank) Heater Diesel Oil Stove Gas Stove
Livestock Dung Stove
Wood Stove
Source: 2002 People’s Priorities Survey
Poverty Profile of Nakhichevan.
A poverty assessment was done in Azerbaijan in 1996 that also covered NAR. This section reports on the results of this assessment along with updated information from the past two years.
Although the sample for the 1996 assessment is not representative by economic zone, the results by zone are strongly indicative and confirm information from other sources. The regional results are presented in Table 14, which presents regional poverty rates using national prices, and those obtained using regional prices. Nakhichevan stands out as substantially poorer than the rest of the country, with the highest regional poverty rates. It is also the only area where using regional prices has a dramatic impact on the severe poverty rate, resulting in the share of very poor households almost doubling. This is consistent with rapid assessment findings, and reflects the effects of the closure of its borders with Armenia and Iran which appears to have driven up food prices and other costs such as transportation and logistics more sharply than in other parts of the country.
The Central zone of Azerbaijan also stands out with a severe poverty rate 75 percent higher than the national average. This is consistent with information from official, UN and NGO sources. The results indicate that the severe poverty rate is, however, around average if IDPs living in the Central Zone are excluded in the analysis. This implies very strongly that NAR essentially was the poorest region for those permanently living there.
Table 14: Household poverty rates by economic zone Using national prices Using regional prices
Very poor Poor Very poor Poor Southwest 11.8% 49.5% 10.5% 50.0% Far Northwest 10.8% 49.7% 12.4% 52.2% Center North 11.8% 59.0% 11.8% 61.8%
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Nakhevan 31% 84.5% 59.5% 90.5% Far South 14.1% 57.0% 15.5% 60.6% Near Northwest 20.5% 64.4% 22.0% 65.2% Central 35.2% 70.7% 31.0% 67.1% Apsheron 22.6% 64.2% 25.8% 66.8% Source: Azerbaijan Poverty Assessment, World Bank 1997
Regional inequality appears to be a significant problem, though there are no comparable regional data available for earlier periods to gauge the dynamics of the problem. Using regional prices, the share of households in severe poverty is almost six times higher in Nakhichevan than in the Southwest region (Table 14). Even if Nakhichevan is excluded, the standard deviation from the national average rate of severe poverty is just under 8 percentage points (again using regional prices). The regional poverty rates are also robust to the exclusion of IDPs, with only the Central Zone having a large fall (of around 50 percent) in the regional severe poverty rate when IDPs are excluded.
Educational statistics are also worse for NAR. Regional enrollment rates for 6-16 year olds exhibit significant variations among the very poor, with Baku and Aspheron rates of 97 percent, compared to only 75 percent in the Near Southwest. The share of IDPs relative to the existing regional population appears to be an important correlate of enrollment rates among the very poor. The regional differences in extended absence among those enrolled are more dramatic. For very poor 6-16 year olds, the differentials were very large, ranging from 43 percent in the Far South and 38 percent in Nakhichevan to only 2 percent in Baku and Aspheron, and a national average of 11 percent. Overall, high education-associated costs and children's health accounted for over two thirds of extended absence (highlighting the important links between children's health and education).3' Similar patterns exist in enrollment and absence rates for higher education, though small sub- group sizes caution against strong conclusions. At all levels and for all groups, however, the problem of extended absence appears to be significantly worse in the Far South and Nakhichevan.
Focusing on inequality, the 1996 Poverty Assessment and other findings suggest that a small group of very wealthy households now exists, and this is confirmed by comparative data on the decile ratio in 1989 (when the average earnings of the richest decile were around 3.3 times those of the poorest), and in 1995 (where the ratio had risen to 8.5:1). Despite this, the overall level of inequality in ASLC results was not unduly high, with a Gini coefficient of around 0.35. Nevertheless, regional differentials are significant, with particularly Nakhichevan standing out as much poorer than the rest of the country. In some cases, such as the Central Zone, the differentials are driven to a significant degree by high concentrations of IDPs, but in most areas they are robust even with the omission of IDPs from the analysis.
The poverty line used in Poverty Assessment is a food-basket poverty line. It is based on the minimum food basket developed under the auspices of the Ministry of Labor and Social Protection (MLSP) by the Department of
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Public Hygiene and Nutrition at the Azerbaijan Medical University . The poverty line was priced on November 1995 prices, which prevailed at the time of the household survey. The prices used were obtained from the Save the Children organization and are very close to those provided by the State Statistical Committee for the same items. Although a standard national price was used, analysis using regional prices revealed that - omitting Nakhichevan, where food prices were more than 40 percent above the national average - the standard deviation in the price of the basket for all economic zones was only 5,669 manat, or around 5 percent of the national average.
However, analysis of the poverty data was also done using regional prices, and some results are presented in this annex. As stressed in the main report, the survey is not statistically representative by economic zone, but the results are nonetheless of interest. The most striking observation is the very high price of the basket in Nakhichevan, which is over 40 percent higher than the national average per capita basket. With that one important exception, the regional price variations are not great, with the lowest priced basket (in the Central zone) only around 10 percent below the national average.
The rate of severe poverty in Nakhichevan jumps dramatically when regional rather than national prices are used. In the main report, the regional severe poverty rate for individuals using national prices was around 37 percent, whereas it rises to around 68 percent using regional prices. In the case of households, the severe poverty rate in Nakhichevan jumps from 31 percent to around 60 percent. This indicates a clustering of households in Nakhichevan with per capita food expenditures at the time of the survey of between around 61,000 manats (half the price of the basket priced at national prices) and around 87,000 (half the price of the basket priced at regional prices).
In addition to these findings, some areas of Azerbaijan were consistently identified by focus groups and came out in community surveys as more likely to be poor. They were:
• Nakhichevan. Both focus groups and community survey results confirmed the earlier finding that people in Nakhichevan were highly likely to be poor and much more likely to be very poor, mainly due to higher food prices. • Areas bordering the conflict zone. These regions suffer particularly from lack of access to essential services, often because energy and water sources are controlled by Armenia. There is also more likely to be a higher concentration of IDPs in these areas. • Mountainous areas (i.e. the north, north west and south of the country). These areas were felt to suffer from their relative isolation and are often snow-bound in winter, increasing the cost of supplies and transport.
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These findings are all relevant to NAR and confirm its being substantially worse off than many other parts of the country due to isolation, the results of conflict and blockades and geography in general.
Groups in all areas of Azerbaijan mentioned migration to other countries as a possible strategy to earn an income (and in the case of young men, as a way to avoid military service in some instances). Some suggested going abroad, buying goods and returning to sell them in Azerbaijan. Informal trading routes have been established between Nakhichevan and Turkey. People from Nakhichevan buy Turkish goods and fly to Baku and sell them in a market now established outside Baku airport. It was also stated that people want to go to other countries, and live and work there, sending money back to their families or bringing their families to the new location. Countries mentioned include Russia, Belarus, and Ukraine.
Anyone who has produce to -sell may become a trader. Food produce (vegetables, fruit, meat and animal products) is sold in both rural and urban areas. One common pattern is for the urban branch of extended families to sell produce brought in from rural relatives. Alternatively, rural people come into Baku and other cities to sell their own produce (resulting in lively markets around the central railway stations). Home production of goods include the making of reed baskets, tools, brushes, clothes, knitted items and carpets, all of which may be sold in any market. Goods such as clothes, toys, notebooks etc. are imported from Russia, Iran and Turkey among other places and sold mainly in urban areas. There are established routes for incoming goods; people travel to Iran by bus or car to buy goods; fly to Dubai and Moscow; cross the border to Turkey from Nakhichevan and then fly to Baku on return to trade goods in a market now established near the airport. Informal sector focus groups felt that they are marginally better off than the rest of the population.
More recent examinations of poverty since the 1996 assessment confirm that Azerbaijan remains one of the poorest republics in the post- Soviet era due to disruptions in its production and trade, deterioration of its social and health sectors, and the economic costs of regional conflict after the fall of the Soviet Union. Although current poverty rates report some overall economic gains since 1991, increasing gaps between the wealthy and the poor have placed additional constraints on marginalized populations and have limited growth opportunities for people within the Republic. In impoverished regions such as Nakhichevan, where basic poverty has been exacerbated by isolation and blockades, these barriers have suppressed the elimination of poverty by disrupting inter and intra-national trade, creating masses of internally displaced people (IDPs), and by challenging already stressed health, education and agricultural systems. Based on these influences, and the geographic constraints of Nakhichevan’s separation from mainland Azerbaijan, it is imperative that further investigation of the effects of poverty on this region be carried out to help determine the most effective and efficient strategies that will ensure sustainable development. The alternative is for the people of NAR to continue to suffer from enforced isolation.
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In 1995 Nakhichevan was reported as the poorest region of the AR. In 2000, based on a geographical distribution of poverty rates, the region reportedly stood out as, “substantially poorer than the rest of the country” with a high percentage (84 percent) of poor inhabitants.22 Another assessment that year supported substantial increases in poverty during the first half of the 1990’s and further studies revealed the occurrence of even sharper regional increases in poverty during the second half of the decade.23 These conclusions were based on local food prices used in the calculation of the food basket.24 Furthermore, between 1995 and 1999 the average poverty gap jumped from 24 to 44 percent indicating the average percentage by which household food expenditures fell below the food poverty line. The 1999 figures reflect the growing difficulty of poverty alleviation among the most marginalized groups as stratified results contribute 30 and 65 percent of the increased poverty gap to the poor and very poor respectively. In addition to the aftermath of war, these issues have presented barriers to decreasing poverty and increasing the overall wealth of the region. Income levels. The average GNP per capita in Nakhichevan is low and unemployment in the region is very high.
According to the LSMS data the overall income for Nakhichevan was estimated at 711,049 manats (urban) and 645,370 manats(rural) compared with annual income of 826,558 manat and 692,497 manat for urban and rural areas respectively for the country as a whole, as shown in Table 15 below.The LSMS survey orchestrated by the Azeri State Statistic Institute did not, however, represent intra-regional characteristics of Azerbaijan because the survey was taken at the national level. For this reason, there was no investigation into poverty occurring at the regional level in Nakhichevan.
The Survey of Peoples Priorities was designed to be representative at the regional level to explore more specifically what is occurring and the characteristics of areas such as poverty in the Nakhichevan region of Azerbaijan. Based on data collection in each of the Nakhichevan districts contemporary information about Nakhichevan was collected. According to the survey, income data suggests that urban areas experience a slightly lower overall income (413,919) than rural areas (480,011). Furthermore, based on the collection of LSMS data prior to the collection of the 2002 data, Nakhichevan may have experienced overall income based losses versus the suspected increases in income projected by previous studies. However, discrepancies between quarter projections and data collection during differing parts of the fiscal year may reveal few differences that are actually occurring.
Table 15: Income and Expenditures, NAR Mean Mean
22 World Bank. 2000. Azerbaijan Water Supply and Sanitation; Sector Review and Strategy. 23 World Bank. 1997. Azerbaijan Poverty Assessment. 24 The calculation of the food basked using local food prices is particularly telling because food prices in the Nakhichevan Region increased exponentially with the closing of Armenian and Iranian borders due to conflict. These border issues remain a cause of high food prices in Nakhichevan.
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Urban Rural Urban Rural
LSMS Expenditure Data 890,226 650,649 LSMS Income Data 711,049 645,370 LSMS 4th quarter LSMS 4th quarter Income Expenditure Data 1,290,977 786,532 Data 826,558 692,497
Median Median Urban Rural Urban Rural
LSMS Expenditure Data 766,051 563,188 LSMS Income Data 603,501 513,114 LSMS 4th quarter LSMS 4th quarter Income Expenditure Data 1,138,548 704,820 Data 600,000 580,757
According to the LSMS, underreporting of income was very low. This suggests that data for Nakhichevan from the data collection in January 2002 for the Survey of Peoples Priorities data collection was most likely reported accurately. Although the poverty levels from the LSMS are not comparable with the Survey of Peoples Priorities, and the income data are reliable in Nakhichevan, household income was used throughout the study as a relative classifier of poverty.
The 2002 Survey25 of Peoples Priorities used adjusted26 household income in the calculation of poverty. For this purpose, the international standard of $1 /day (very poor) and $2/ day (poor) were used as poverty lines. Because the portion of the survey instrument used for poverty assessment did not seek detailed expenditures the poverty rates are indicative of current trends in the observed rural and urban areas. Furthermore, due to the use of nominal measures, this data does not reflect actual consumption, but patterns that reveal important information about Nakhichevan perceptions of their food and nutritional consumption.
Furthermore, in the absence of a poverty line and a purchasing power parity price level for Nakhichevan in the LSMS 2001-2002 data, the international standard dollar a day method was used for actual poverty calculations. According to the LSMS 2001-2002 survey, poverty has been persistent in Nakhichevan with 88.1% of the population living on less than 2 dollars a day, and 48% of the population living on less than a dollar a day (Table 15). Table 16
25 The Household Budget Survey was carried out by the Azeri State Statistic Institute over four quarters starting in 2001 and completed in 2002. The Household Budget Survey is called in this report the LSMS (Living Standard Measurement Survey) because of its similarity to standard LSMS surveys and particularly to the 1996 Azerbaijan Poverty Survey. The UN consultants were provided a copy of the LSMS and analyzed the data for NAR. Because this LSMS was available, the Survey of Peoples Priorities that the UN consultants undertook as original research was used as a complement to the LSMS. 26 This calculation was adjusted for the underreporting of income.
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Evolution of poverty in Nakhichevan Food Poverty Line -national prices Food Poverty Line - regional prices LSMS 2001* 1996 1996 2001 Very Poor Poor Very Poor Poor Very Poor Poor Nakhichevan 31.0% 84.5% 59.5% 90.5% 48.0% 88.1%
*Poverty rates using 1$/day -2$/day nominal exchange rate (2001 avg exchange rate - 4,657 Manats = US$ 1)
In combination with the LSMS data, the Survey of Peoples Priorities data suggest that poverty levels in Nakhichevan are very high and that they will not diminish in the near future. Therefore, interventions focused on increasing self-sufficiency of the region in addition to efficient and effective strategies for poverty reduction must be implemented and supported by the Azeri government.
As suggested in the overall poverty assessment of 2001, maintaining macro-economic stability and overall economic growth are necessary for the reduction of poverty in Azerbaijan and in Nakhichevan.27 Maintenance of economic stability also ensures further stability of employment for the many Nakhichevan people who do not have steady jobs. Additionally, clear priorities must be established for policies and program that directly reduce poverty in order to achieve progress for the people of the region. Instability in the border regions is also a concern for policy makers as any new conflict may detract from programs that are instated and draw on newly established social and physical infrastructure for military and security purposes. Therefore, national security and political stability are also critical components of poverty reduction.
Because Nakhichevan has not consistently been investigated in studies that have tried to establish poverty reduction strategies for Azerbaijan, additional studies are needed to produce more detailed information about the state of the region. More information is needed about all poverty indicators that have been adopted by international standard (basic education, health care, nutrition, safe drinking water, and sewer systems, as well as income employment and wage levels) and their characteristics in Nakhichevan. Poverty reports on Azerbaijan often focus on the provinces of the mainland, therefore, Nakhichevan remains neglected or minimally addressed (usually through assumption) throughout these reports. Because this region is not a major epicenter of fuel production like Baku and it does not elicit trade, studies based in this region are of critical importance because government based strategies for poverty reduction while beneficial to other regions, may not produce the same outcomes and impact for Nakhichevan. NAR’s different experience with poverty may necessitate supplemental or altogether different programming than provided by new government initiatives that focus on other regions. Issues of this nature are critical to the
27 World Bank. 2001 Interim PRSP and Joint IDS-IMF Staff Assessment of the Interim Poverty Reduction Paper.
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achievement of government goals and projections for poverty alleviation in all regions of the country such as the “substantial improvements in the delivery of government services to the lowest income segments of the population (electricity, gas and water supply, education, health care, land reclamation, ecology, etc.)”. These goals and projections are supported in efforts to promote balanced poverty reduction efforts through economic growth, price stability for products and goods and the creation of new jobs. All of this can be successfully achieved in Nakhichevan if many key determinants of poverty for NAR specifically are addressed.
While Nakhichevan experiences overall poverty, regional and urban/rural based data from the Survey of Peoples Priorities suggest that there are some differences in the experience of poverty among these groups. For example, urban/rural survey data shows similar percentage reports of children who do not receive adequate nutrition whether wealthy or poor and across rural and urban groups (Table 1). There is however, a marked discrepancy between poorer and richer rural (6 vs. 30 percent) and urban (15 vs. 27 percent) families who believe that their children are receiving proper nutrition from the food that they are provided on regular basis (Table 1).
Table 17a: Sufficient Child Nutrition: Rural versus Urban Perception
Rural Urban
Wealth Level 1 2 3 4 5 1 2 3 4 5
No Answer 5% 3% 3% 1% 2% 0% 0% 5% 0% 0%
Yes 6% 10% 18% 28% 30% 15% 21% 35% 67% 27%
No 39% 56% 45% 44% 41% 39% 42% 50% 22% 55%
No Children 49% 31% 33% 27% 28% 46% 36% 10% 11% 18%
Wealth Level is based on a 1(poor) to 5 (wealthy) scale. Source: 2002 People’s Priorities Survey
Following the growing concern for proper child nutrition, Survey of Peoples Priorities participants believe that their children are mostly deficient in milk and dairy, and meat, eggs and poultry products. The data also revealed that irrespective of wealth and rural/urban status, an average of 55 percent of participants provided a response of no answer for areas in which they believe nutrition may be lacking (Table 17). Because an average of 63 percent of all responses for households with children believe that their children are not receiving proper nutrition, this response pattern may indicate a need for educational interventions for children and parents that focus on proper child (and eventual adult) nutrition. Additionally, dietary supplements may need to be provided to facilitate proper nutrition (Table 18). Because general health concerns of the impoverished often inextricably link nutrition to physiological and mental development (especially in children), programs
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of this nature can contribute to decreases in overall health problems occurring in the region. This, however, will require further investigation by public health officials through the offices of the Ministry of Health.
Table 17b: Sufficient Child Nutrition: Rural versus Urban Perception of the Absence of Dietary Inputs
Rural Urban
Wealth Level1 2 3 4 5 1 2 3 4 5
No Answer 57% 39% 52% 56% 56% 57% 55% 50% 78% 45%
Milk and Dairy 21% 25% 10% 6% 2% 21% 27% 35% 11% 18% Products
Meat, Eggs, 20% 28% 24% 27% 32% 18% 18% 15% 11% 9% Poultry
Fish 1% 7% 12% 11% 8% 0% 0% 0% 0% 18%
Wealth Level is based on a 1(poor) to 5 (wealthy) scale.
Determinants of Welfare
The following model intends to understand the dynamics of welfare in NAR. The welfare indicator is the total cash and in-kind income of the household. The constant is significant at 1% level and has a very high coefficient. This is explained by the variables left out in the model. These variables are household heads with no schooling, households with no land holding, households with no farming equipment, unemployed household heads. This indicates that households which has the previously mentioned characteristics has a higher level welfare than those who do not have these characteristics.
• Nakhichevan, Shahbuz and Julfa regions have better income generating opportunities. • Size of the farming plot stands out as a very important indication of welfare. Although it is believed to be equally distributed during the land privatization process, land ownership is a dynamic process therefore the it is not surprising to observe unequal distribution. • All farming equipment have significant factor role in welfare. Specifically, owning a artesian well and tractors have bigger impact. In addition, households which have access to irrigation are significantly better off, which supports the fact that rain fed farming (mostly wheat and food crops) is a self subsistence activity rather than a wealth accumulating process. • Full time employment and working for the government sector (administrative, state enterprises, education, health care, and army) are important factors. Previously in our report, we’ve observed that wages for the government are higher than average. Since integration of NAR with the
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outside world is broken and there are very few commercial activities which can create employment, the Government of Azerbaijan is continuously supporting the citizens of NAR with transfers.
Table 18 Dependent Variable: Log Income Coefficients Significance Model (Constant) 12.619 0.000 *** SADARAK -0.226 0.000 *** SHARUR -0.080 0.000 *** BABEK -0.313 0.000 *** NAKHICHEVAN 0.412 0.000 *** SHAHBUZ 0.517 0.000 ***
regionaldummies JULFA 0.425 0.000 *** LOGLAND 0.280 0.000 *** OWN HORSE 0.218 0.000 ***
OWN DONKEY 0.363 0.000 *** OWN WATER PUMP 0.213 0.000 *** OWN TRACTOR 0.418 0.000 *** dummies OWN CAR 0.226 0.000 *** agro equipment equipment agro OWN MINITRACTOR 0.502 0.000 ***
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OWN WELL 0.712 0.000 ***
PRIMARY* 0.090 0.000 *** TECHNIKOM* 0.016 0.260 HIGH* 0.071 0.000 *** UNIVERSITY* 0.108 0.000 *** FULLTIME EMPLOYED** 0.130 0.000 *** economic dummies economic - GOVERNMENT WORKER** 0.303 0.000 ***
socio SMALL-MEDIUM ENTERPRISE** -0.027 0.034 DUMMY IRRIGATION 0.434 0.000 ***
*Schooling of the household head **Economic activity of the household head *** Significant at 1% level
Source: 2002 People’s Priorities Survey
The Agricultural Sector in NAR
Reform and restructuring of the agricultural sector in Azerbaijan is vital to improve the living standards of the rural people, who comprise 46 percent of the growing population in the country as a whole. While agriculture in NAR has its own particularities, it depends to a great extent on the challenges and options for agriculture in the country at large, which justifies this sector’s having a special emphasis in this report.
After independence in 1991, agricultural production declined (by 13 percent in 1994 following declines of 12 and 25 percent in the preceding two years) and yields have dropped by 30 percent or more for grain, cotton, grapes and tobacco. The overall contribution of agriculture to exports has also declined from about 30 percent to about 10 percent since 1991. Traditionally, agricultural production mostly occurred on collective and state farms, which is gradually being replaced by individual private farms.
Agriculture encompasses nine distinct agro-climatic zone in Azerbaijan giving rise to a highly diversified crop mix. It is dependent on irrigation and imports of the key inputs, viz. hybrid seeds, fertilizer, pesticides, farm machinery and equipment. About half of the total agricultural land (4.4 million ha) is used for crop production with the
100 101 remainder being used for natural pastures. About 75 percent of the land (1.5 million ha) used for crop production is dependent on irrigation.
The main problems and the opportunities in the agricultural sector according to sector analysis done by experts are:
(i) Weak Institutional Support: The traditional role of the Government to guide and provide all the necessary means for agricultural production, distribution and marketing for agricultural inputs and outputs has been on the decline since independence. However, the absence of alternative support systems has led to rent seeking and control by the few remaining Government monopolies. There is a need to redefine the role of the public and private sectors in the agricultural sector - strengthening those Government institutions which must continue to play a role in a market economy to provide research, extension, public infrastructure and developing private structures to perform direct production, marketing and trade;
(ii) Incomplete Liberalization of the Sector: Complete liberalization in output prices of perishable products, viz., fruits, vegetables and livestock products has taken place, which has led to their production almost exclusively in the private sector. However, the agro-processing industries still continue to be predominantly in the public sector, thereby limiting the realization of the full production potential and income increasing opportunities in these products.
(iii) Deteriorated On-Farm and Inter-Farm Infrastructure. The irrigation systems in these farms were built during the 1960s and 1970s and due to lack of maintenance in recent years have deteriorated. These were designed to serve large scale farms with cropping and management for arable lands ranging in size from 700 to 4500 hectares. Off-farm irrigation water conveyance efficiency is low (less than 50 percent) as the system has deteriorated from lack of maintenance. The poor status of irrigation and drainage canals is the major constraint to farm productivity, especially in NAR and, without reconstruction, will further erode farm profitability. Farm buildings and farm access roads also suffer from poor maintenance;
(iv) Obsolete Farm Machinery. The neglected state of most machines and equipment poses a serious constraint for timely farm operations. Listed in Figure 6.a, most of the farm machinery is outdated and obsolete and in need of repairs and replacements;
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Figure 6.a: Ownership of agricultural assets
8% 6% 4% 2% 0% Car pump Truck Mini- Water Well Horses tractor Tractor Artesian Donkeys Source: People's Priorities Survey, 2002
(v) Lack of Credit and Input Availability. Most of the farms are facing liquidity constraints and are not able to buy inputs. Most inputs such as nitrogenous and potash fertilizers, pesticides, herbicides, seeds, farm machinery are imported; and
(vi) Deterioration of Social Services and Quality of Life. Many who live in the rural areas and depend on farming could be classified as vulnerable, resulting from their inability to sell their produce, unpaid salaries, and withdrawal of Government support. Many able bodied working men have migrated to neighboring countries in search of better employment opportunities. The farms are no longer able to provide social services such as health facilities, child care, schooling, drinking water and sanitation facilities, etc, which once belonged to the former state and collective farm operations. The removal of explicit and implicit food subsidies and the elimination of bread subsidies in 1995 have placed increased hardship, especially on non-working pensioners, women and children.
Our methodology in assessing the agricultural sector in Nakhichevan considers the shift to the market economy by examining the cross-sectional data beginning from 1991. The study of the agricultural sector will identify both the positive and negative effects of this shift to the market economy. Changes in production efficiencies, yields, shifts from cash crops to food crops and changes in the condition of the infrastructure supporting agriculture will be discussed. Finally recommendations on regional crop strategy, and paths to improving efficiency will be developed initially in this Phase I and in more detail in the Phase II report. The next phase will show how agriculture can be developed by reducing barriers and obstacles and making the agriculture industry a sustainable poverty reduction vehicle for the future of NAR.
Until 1991 the farming structure of Azerbaijan consisted of collective farms (Kolhoz) and state farms (Solhoz) cultivating a total of 1.46 million ha. The total area of NAR is 536,000 ha of which 157,200 was considered arable land in 1991 – 112,400 ha used for grazing, 39,800 ha for crops and 5,000 ha for forest cultivation and other purposes. During the transition to a more market oriented economy in the 1990s, 55,000 ha were privatized in
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NAR for the benefit of some 76,000 families28 indicating that household plot size is extremely small, in comparison with the larger farms during the Communist period and with international experience of minimum farm size for financial sustainability.
During the USSR period, almost all of the agricultural production was shipped to USSR either in semi-processed or in processed forms. The railroad connecting Nakhichevan to USSR was active in transporting major cash crop harvests such as tobacco, cotton as well as bottled wine and conserved fruits. NAR’s grapes, the wine from the region were very unique and well known throughout the USSR. Fruit produce of the Ordubad district was similarly prized.
The comparison of production of different crops between 1991 and 2001 provides the picture of the significant changes after 1991 due to the interruption to the supply chain both caused by the conflict between Armenia and with the end of the communist system. 1991 was a year in which the Kolhoz and Solhoz had firm control and agricultural production worked through big government programs. During this period essentially all agricultural products were purchased by the Soviet Union. The difference between production figures of 1991 and 2001 indicate the direction agricultural production is taking in NAR
Figure 6.b: Produced volume 1991-2001 (1,000 ton)
70 60 50 40 30 1,000ton 20 10 0
Fruit Grain Grape Tobacco Potatoes Sugar beet Vegetables
1991 2001
Garden produced (watermelon,etc.) Produce
28 Given the average size of families, privatization impacted about 242,000 people 68% of NAR’s population of 354,000.
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Figure 6.b (Source: Compiled by Social Assessment, LLC, 2002)
There has been a dramatic change in production volumes since 1991: (i) a dramatic decrease in the production of grapes, and of grapes processed into wine, both as a result of the campaign at the end of the USSR against alcohol and the loss of subsidized markets for grapes; and (ii) a change in production towards what farmers can produce individually and sell themselves (vegetables, fruits and other garden produce) as well as to a new crop (sugar beet0 and to grains, in part to provide fodder for household livestock. According to 2001 agricultural data, land used for agricultural production was 39,800 ha, compared to 28,300 ha. in 1991 (Figure 7). The increase in land in use is probably due to the privatization process which has allowed a large number of household to engage in farming activities. Figure 7
Figure 7: Arable land comparison, 1991-2001 (in 1,000 ha)
14 12 10 8 6 4
1,000 hectares 2 0
Grain Barley Other Tobacco Potatoes Sugar beet Vegetables
1991 2001 Animal feed plants Tomatoe and Cucumber Products
Source: Compiled by Social Assessment LLC, 2002
Although the arable land has increased 40 percent the agricultural production has increased 250 percent, demonstrating that the land is being more intensively farmed with the increase in household farming. In addition, sugar beet is a newly introduced product whose growth along with the increases in grains and vegetables and fruits, has had an enormous impact when comparing productions between 1991 and 2001.
In terms of productivity, the increase in agricultural output can be broken down to demonstrate the changes per ha., which are positive for every crop except tobacco (Figure 8).
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Figure 8
Figure 8: Productivity Comparison, 1991-2001 (in 100kg/hectare)
300 250 200 150 100 100kg/ha 50 0
Grain Fruit Grapes Tobacco Potatoes Sugar beet Vegetables 1991 2001
Tomato and cucumber Product
Source: Compiled by Social Assessment LLC, 2002
The amount of product available for individual consumption in 1991 and in 2001 is illustrated below (in kg.) which could be used either for household use or for marketing.
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Figure 9
Figure 9: Individual Consumption Comparison, 1991-2001 (in kgs)
180 160 140 120 100
Kgs 80 60 40 20 0
Milk Fruit Meat Grain Grape Tobacco Potatoes Vegetables Sugar beets Eggs (single) 1991 2001
Watermelon, tomato,cucumber Product
Source: Compiled by Social Assessment LLC, 2002 These statistics review the dramatic decline in the grape and tobacco sectors whose production has dropped to near zero. Those who had been dependant on these products have turned to producing other goods such as grains, sugar beets and fruits and vegetables, etc (Table 19).
Another factor which has caused an increase in products such as grain is that these products do not require large amounts of water, and given the weak irrigation systems, production and growth in volume of other crops, or crops where irrigation can be done by households, is to be expected.
The transition to a more market-oriented economy has resulted in a slight reduction in the number of large farm animals and a dramatic increase in small farm animals and poultry, more typical of small, individual farms (Figure 10).
Figure 10
Figure 10: Animal distribution comparison table (in thousands)
500 450 400 350 300 250 200
thousands 150 100 1991 50 0 Large farm animals Small farm animals Poultr y 2001 Animals 106 107
Source: Compiled by Social Assessment LLC, 2002
The increase in livestock has also had an affect on the amount of livestock- related products as seen in the following table.
Figure 11
Figure 11: Livestock-related product distribution (in thousands)
70 60 50 40 30 20
in thousands in 10 0 Meat (in kgs) Milk (in liters) Eggs Wool (in actual weight) 1991 2001 Product
Source: Compiled by Social Assessment LLC, 2002
Table 19: Changes in Crop Production Total cultivated land for agricultural crops (ha) 1996 1997 1998 1999 2000 2001 Nakhichevan AR 28,822 32,445 34,925 24,714 37,117 39,800 % change 13% 8% -29% 50% 7% Azerbaijan 1,207,239 1,077,916 920,429 832,752 1,041,542 1,160,000* % change -11% -15% -10% 25% 11%
Production of grain (tons) 1996 1997 1998 1999 2000 2001 Nakhichevan AR 22527 43168 55189 43024 54428 59000 % change 92% 28% -22% 27% 8% Azerbaijan 1,018,307 1,127,063 950,349 1,098,348 1,540,178 1,500,000* % change 11% -16% 16% 40% -3%
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Production of potatoes (tons) 1996 1997 1998 1999 2000 2001 Nakhichevan AR 5,974 8,941 10,336 10,613 13,454 15,200 % change 50% 16% 3% 27% 13% Azerbaijan 214,556 223,400 312,540 394,149 469,009 490,000* % change 4% 40% 26% 19% 4%
Production of vegetables (tons) 1996 1997 1998 1999 2000 2001 Nakhichevan AR 25,202 23,826 22,734 26,184 42,723 47,700 % change -5% -5% 15% 63% 12% Azerbaijan 570,007 495,404 502,325 670,845 780,839 820,000* % change -13% 1% 34% 16% 5%
Production of meat (tons) 1996 1997 1998 1999 2000 2001 Nakhichevan AR 4,017 4,131 4,561 4,776 5,271 5,400 % change 3% 10% 5% 10% 2% Azerbaijan 85,698 90,500 99,938 104,648 108,692 113,040 % change 6% 10% 5% 4% 4%
Production of milk (tons) 1996 1997 1998 1999 2000 2001 Nakhichevan AR 34,293 37,011 27,694 29,065 38,871 41,200 % change 8% -25% 5% 34% 6% Azerbaijan 843,253 881,547 946,501 993,366 1,031,114 1,062,047 % change 5% 7% 5% 4% 3%
Production of egg (thousand units) 1996 1997 1998 1999 2000 2001 Nakhichevan AR 39,754 38,494 56,837 58,766 45,817 60,100 % change -3% 48% 3% -22% 31% Azerbaijan 477,287 492,427 509,011 526,289 542,604 558,882 % change 3% 3% 3% 3% 3%
Productivity of Land - Grain (percent/ha) 1996 1997 1998 1999 2000 2001 Nakhichevan AR 12.7 20.2 24.7 27.2 35.6 37.3 % change 59% 22% 10% 31% 5% Azerbaijan 16.3 17.4 16.2 21.2 23.8 24.5 % change 7% -7% 31% 12% 3%
Productivity of Land - Potato (percent/ha) 1996 1997 1998 1999 2000 2001 Nakhichevan AR 81.1 79.6 84.1 86.7 93.0 93.3 % change -2% 6% 3% 7% 0% Azerbaijan 101.4 82.7 95.3 95.2 84.0 88.2 % change -18% 15% 0% -12% 5%
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Productivity of Land - Vegetables (percent/ha) 1996 1997 1998 1999 2000 2001 Nakhichevan AR 61.5 96.2 82.1 86.8 88.0 88.5 % change 56% -15% 6% 1% 1% Azerbaijan 178.2 156.3 140.1 137.0 133.0 137.0 % change -12% -10% -2% -3% 3%
In order to deepen the investigation into the agricultural sector, the UN consultants interviewed a number of stakeholders29 which together with other data resulted in a number of conclusions about the sector which NAR people believe are important, especially concerning water, electricity, financing, raw material, lack of feed for livestock, agricultural plot size, subsidies and markets.
Water. Water is a key problem in a region with low precipitation, about 250 mm annually, especially when less than 20% of annual rainfall occurs during the growing season. The croplands along the Araz River have easy access to irrigation. However, in fact, most irrigation pipes and pumps are more than 10 years old. Most pumps are not properly functioning and require frequent repairs. In order to use the Araz river for more effective irrigation, investment into new pumps and longer pipes are required. The districts of Sherur, Sadarak and Julfa districts depend on artesian wells for irrigation; the districts of Ordubad and Shahbuz benefit from natural irrigation.
Artesian water30 is more available in the Sherur district but the wells must be as deep as 100 meters in the Sadarak region (costing about 40 million manats). An ILO sponsored initiative, International Organization for Migration (IOM), has started a program where the beneficiary community contributes to the cost of the artesian well construction. The World Bank also supports artesian well construction. In the last decade rain fall has been comparatively lower, therefore large water reserves are harder to keep at high levels, due to the drought.
In terms of Nakhichevan’s agricultural development, water is the most pressing issue and a factor which is creating a bottleneck for development. There are several reasons which contribute to the continuing water shortage. The most important of these is the drought which has been going on for the past five years. There are expectations that this year’s snow and rainfall will help to ameliorate the water shortage, but it would be equally if not more prudent to make structural developments which will lead to long term solutions. Because of the current water constraints only 35% of arable land is being used. In order to
29 1. Recep Orucev, NAR Department of Agriculture; Salih Veliyev, NAR Director, Statistical Committee; Tahir Türkmen, Türkiye Director, Agri-Sugar Factory; Feridun Haydarov, NAR Ordubad Region Statistical Committee Leader; Hüseyin Seferov, NAR Şahbuz Region Statistical Committee Leader; Vahit Hasanov, NAR Babek Region Statistical Committee Leader; Elşad Aliyev, NAR Babek Region Executive Director; Babek Rayonu, Nehram village businessman; Yaşar Veliyev, NAR Culha Region Executive Director; Nağdali Aliyev, NAR Culha Region Agriculture Director; Ebulfeyz, NAR Culfa Region Statistical Committee Leader; Hatice Memedov, NAR Şerur Region Statistical Committee Leader; Hüseyin Sadıkov. NAR Haydarabad Agriculture Director; Emin Bayramof, NAR Sederk Region Statistical Committee Leader.
30 Nakhichevan does not have an underground water basin map which would improve the efficiency of finding sustainable sources of artesian water.
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develop the current arable land, and increase the percentage of this land it is crucial that the the efficiency and effectiveness of the existing water infrastructure be improved.
Infrastructural developments which could lead to an increase in NAR’s water supply for agriculture include:
• Small reservoirs and water storage facilities. The amount of water stored in the small reservoirs depends on the season. For this reason it is difficult to give a fixed figure for the amount of water currently in storage in any given region. In Serurda, however, there is a facility that has the capacity to collect 3,500 square meters while in Babek there are two storage facilities which have 100,000 meter square storage capacity. Small reservoirs and small water storage facilities have some potential although they may not be the best option given the extreme weather conditions in Nakhichevan. The high summer temperatures result in large losses given the fact that the water evaporates very quickly from the storage facilities; • Canals, small canals and irrigation canals31. The canals and small canals are in need of basic repairs, and because these repairs have not been carried out, some of them have become unusable. In addition, the evaporation which is such a big problem for the open reservoirs is a problem for canals; • Artesian wells. Artesian wells in NAR play an integral role in agricultural development. The distibution of these wells varies according to district is in footnote32; and • Water pumps. The water pumps can be divided into two technological groups. The first of these is relatively big, immobile and uses a large amount electricity. There are 32 of these pumps, 17 of which were made after 1991; The second type of water pump is a small one which uses diesel fuel and is used on individual plots to irrigate fields. The number of these small water pumps is hard to pinpoint, as new ones are constantly being imported from Turkey, but they represent the kind of small-scale irrigation used widely around the world.
Given the limited rainfall in NAR, even with improved use of natural rainfall, irrigation is essential to the agricultural sector. However, access of NAR farmers to irrigation is relatively limited at 18.6% with the Sadarak District having substantial irrigation in contrast to low levels of irrigation access in the other five districts of the region, as shown below (Figure 12).
31 The distribution of these canals by districts is as follows: Şerur District, 30 Km; Babek District, 24.5Km; Çulfa District, 36.5 Km; Ordubad District, 24.5 Km; Şahbuz District, 5 Km; Sederk District, 2.5 km. 32 Şerur District, 26; Babek District, 9; Çulfa District, 3; Ordubad District, 10; Şahbuz District, 1; and Sederk District, 23.
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Figure 12: Percentage of households with access to irrigation
60%
50%
40%
30%
20%
10%
0% Sadarak Sharur Babek Shahbuz Julfa Ordubad
Surprisingly, satisfaction with the irrigation system is quite high in view of the low level of access, a finding that needs to be examined in more detail (Table 20).
Table 20: Satisfaction with the irrigation system satisfied 48% partly satisfied 33% partly dissatisfied 5% dissatisfied 13%
Electricity. There has been a dramatic decrease in the consumption of electricity in NAR since the fall of the USSR from about 92,000 kw in 1991 to 29,000 kw in 2001. Moreover, electricity is often available only intermittently today. In those areas where the regular production of electricity is necessary for agriculture, especially in irrigation and cold storage facilities for meat, vegetables and fruit, the possibility for producing for distant markets is substantially reduced.
Financing. Development of agriculture requires, surveys conducted for this report show, funding for key activities such as:
• Provision of water, either through constructing wells and irrigation systems or for pumps; • Purchase of agricultural inputs such as seeds, pesticides and fertilizer; and • Purchase of breed livestock with credit sufficiently adaptable to market conditions.
Feed for livestock. It is not clear that the changing demand for livestock feed is being met with maximum efficiency. There is both a shortage of livestock
111 112 feed in general and in relation to the change in livestock production from large to small stock. In addition, there is some indication that sugar beet stalks are being exported instead of used for internal livestock needs. One possible solution is to improve clove production (yonca) which can be grown when fields are being rotated after sugar beet production.
Magnitude of Land Holdings
Thus far in the privatization process, the average size of privatized plots per household is less than one ha as shown in the table below. Average plot size in Nakhichevan is one of the lowest in Azerbaijan. Households have generally retained their traditional private plot, usually surrounding the house. The area of plots varies from 600 sqm. in the densely populated region of Lenkoran to about 1200 sqm in the less densely populated region of Udjar. The plots are used for producing a range of crops (especially vegetables and fruit), raising small livestock, compost and storage. Most of these plots are meticulously maintained and the quality of produce is better than on the collectively.
Even when the variations in household size are considered, however, given the climate/land conditions in NAR, plots are small in comparison with international standards if the objective is to move beyond subsistence agriculture (Table 21)33. The process of moving from initial privatization to a more sustainable system of farming is being investigated through pilot projects financed by a variety of donors, including the World Bank. Since NAR is the site of at least one pilot project, results will be important for determining the future character of household agriculture in NAR.
Table 21:Land for Agriculture Total arable land 100,000 ha Privatized land 56,000 ha Land ownership 72,000 households Average land plot size per household 0.78 ha
33 The risk associated with funding newly privatized farms, and the dependence on assumptions which are a particular risk for blockaded NAR, is shown in the risk assessment for one of the pilot programs being funded by international donors: “The risk is the continued ability of the privatized farm units to operate as financially viable operations and be able to service the working capital and investment loans. In this regard, the financial analysis, based on conservative yield increases and current market prices, reveals that the "new privatized farms" would be able to generate sufficient cash flows to repay loans. The size of farm holdings would range between 5 to 10 ha per family household, which together with their household "garden plots" and cattle would provide adequate income to continue farming. However, if the price liberalization policies were to be reversed, and the prices remain unchanged, then the rate of return becomes marginal, yielding about 12 percent. The implementation of the Government's price and trade liberalization policies, expected macro-economic stabilization in the near term, resolution of border conflicts and opening of marketing channels is expected to sustain the financial viability of the privatized farms.”
112 113
The issue of plot size and the process of privatization are of great importance for NAR. An important source of assistance to the transformation of agriculture in Azerbaijan, including NAR, is the Agricultural Development and Credit Project funded by Government with assistance from the World Bank. Based on stakeholder consultations within the framework of a process of social assessment which focused in priority on the needs of the low-income rural populations and their expectations from the public sector, the Bank is funding a program of agricultural sector reform, with an emphasis on land registration. Activities include:
• Support to the Central office and ten regional offices of the State Land Committee for issuance of land titles and for the development of a decentralized land registration system and land ownership database; and
• Implementation of a pilot unified real estate registration system and cadastral system in the NAR34, covering both urban and rural land, as a model that could later serve as a basis for wider geographic replication throughout Azerbaijan.
The Project will also include a unified cadaster and registration system for land and buildings to be set up in NAR. Real property information for rural and urban land and all of the buildings will form the base of this system. The pilot approach is expected to make it possible to develop a cadastral model and a sound national policy that can be implemented in the whole of Azerbaijan in subsequent phases. The component will pilot an appropriate approach to a unified national cadaster on a regional basis before devoting the substantial resources required for implementation of national system. This typically involves urban land and buildings as well as rural properties and experiences a far greater number of transactions then rural land registries.
Subsidies
Subsidies, as in the USSR, have continued to play an important, although decreasing, role in agriculture in Azerbaijan35, and this has been of particular importance for NAR which while it may have benefited somewhat from friendly relations with the Turkish market, has suffered massively from the blockade with Armenia. Farm enterprises in NAR, and those working in agriculture, have been exempt from taxes for the past five years, an exemption that may well be renewed in the future. Surveys done for this report also suggest there are no customs costs associated with agricultural, or other, exports.
Farm enterprises do not pay for electricity based on how many kw/hour they use but rather they pay depending on the size of the farm, and as compared with international electricity prices, the prices in Nakhichevan are very low. For example, a five ha farm owner pays 10,000 manat (close to US$ 2) per month in electricity
34 Nakhchivan, with its six districts and a mix of urban and rural areas, was chosen because it is representative of Azerbaijan as a whole and because it has its own Parliament which can facilitate the adoption of the appropriate legal framework. 35 Given the benefits of subsidies, agriculture has become a focal point for many people; even civil servants who live in rural areas have become involved in agriculture in one way or another to benefit from this subsidy.
113 114 bills. The agricultural sector in NAR also benefits from more general NAR subsidies such as those for transportation.36
Markets
The collapse of the former Soviet Union, the blockade by Armenia, and the transition to a more market oriented economy have had substantial and diverse impacts on markets for agriculture and other materials both positively and negatively. This section will examine in summary form some of the market changes.
Grapes and wine
In 1991, Nakhichevan produced 55,000 tons of grapes. By the year 2001, this figure had dropped by 75 percent to 13,800 tons. NAR has been a major producer of both grapes for eating and for processing into wine. Both markets have declined dramatically. Before the USSR instituted its campaign against alcoholic beverages in the 1980s, NAR’s strongest agricultural processing was related to the production of wine. Currently the region’s wine37 production facilities have been shut down for nearly a decade as it was not able to re-establish its markets for wine with the end of the USSR. Most of the production of grapes for eating went to the USSR, and this market has declined despite the fact the NAR grapes were considered of high quality, both for eating and for wine production. Re-establishing a market for grapes depends on marketing, quality control and storage and transportation logistics for both Turkey and Europe. Wine production would be more complicated as it is not clear whether it should be provision of grapes/juice for processing in other countries or directly in NAR. Substantial funding, as well as reliable electricity, would be needed to re- establish the grape/wine industry38.
Sugar Beets
Currently 40,000 tons of sugar beet are being produced on 1,900 ha. Eight years ago sugar beet production levels started out at 2000 tons and according to an agreement with the Turkish Sugar Processing Public Enterprise 1 ton of sugar beet was traded for 95 kg of sugar. Given the increasing levels of national demand for sugar, sugar beet production has been growing steadily each year. The Turkish Sugar Processing Public Enterprise was so pleased with the 2001 sugar beet volume— 40,300 tons—that it has agreed to purchase the entire 2002 planned sugar beet volume of 50,000 tons. The Turkish enterprise has put forward a long term plan to purchase up to 150,000 tons on 5,000 ha.39
36 NAR is subsidizing transport. The air fare for NAR- Baku round-trip is US$20, versus US$160 for the equivalent distance in Turkey. NAR domestic travel is also subsidized via the low cost of fuel so that travel among districts in NAR costs about US$1 equivalent. 37 It is ironic, and testament to the impact of market changes, that wine consumed today in NAR is imported from mainland Azerbaijan. 38 It appears that corking/bottling facilities in NAR could still function effectively if the rest of the wine industry revived. In addition, grapes are not water intensive, important for a water scarce area such as NAR. 39 If these production levels becomes a reality NAR will meet national demand for sugar beet and at the same time it might be feasible to operate a 1000 ton/day sugar factory.
114 115
Vegetable Oil
A plot of land which has grown sugar beets for a year must be given at least three years of fallow to regain nutrients. However, because the products grown on the land during this resting period do not have a market and because alternative products that do have a market have not been identified this three year resting period is being cut down to one year. Experts have identified sunflower as a possible product to raise on the land during the three year period. This is an ideal product for Nakhichevan to produce given that there is a shortage of sunflower seed in the Turkish market. In addition, the people in Nakhichevan have already started switching to margarine as opposed to butter because of the lower cost. It is likely that there will be an increased demand for vegetable oil for health reasons.
Processed Fruit
The production of fruit has increased steadily over the past years and is currently 28,700 tons. These figures are very promising, and coupled with the popularity of the small amount of Nakhichevan plums which have been dried and sold abroad there is strong reason to increase processed fruit outputs. With the increase in apricot production it may be worthwhile to open a factory that produces jam.
Winter Vegetables
During the non-summer months all vegetables consumed in NAR come from Iran and Turkey. The establishment over time of a greenhouse system would appear promising.
Other markets for NAR products have also disappeared both because of the collapse of the USSR and the Armenian blockade which has made transport of bulk commodities to mainland Azerbaijan impossible. The most important impacted markets have been gravel, raw and processed salt and tobacco, as shown in the graph below (Figure 13).
Figure 13: Raw materials
90 80 70 60 50 tons 40 1991 30 2001 20 10 0 Gravel Raw s alt Pr oc es s ed Tobacco 115 salt Materials (thousand m3) 116
The NAR Region– District by District
NAR is made up of six districts, each of which has its unique characteristics and priorities. An important part of the work of the UN consultants was to build up a picture of each district, which is the subject of this section of the report.
Babek District
Babek District has a population of 68,000 of whom an estimated 62,000 are farmers. The district, which is mainly agricultural, produced the following in 2001 (Figure 14).
Figure 14: Babke region products (as of 2001, in thousands of tons) Grapes Fruit Grains
Garden Produce Sugar beets (watermelon, Vegetable Potatoes tomato, etc)
The region is a large producer of vegetables and grains but production only covers the population’s summer consumption. The number of livestock in Babek is relatively high. There are 145,000 livestock in the region, 13,000 of which are large livestock, 132,000 of which are small livestock. The animals are fed 100 percent natural feed. The people themselves use 30 percent of their land to grow feed for livestock. This process accomplishes two things at once; it allows the land to rest during the crop rotation and it provides feed for the animals. On average, each household owns 2-3 large livestock and 12-13 small livestock. These livestock meet the needs for milk, cheese and butter for their respective households as well as providing income for sales of what is surplus to family needs.
Developments in the livestock sector have also led to an increase in production of leather and wool.
At one point the district had a large grape production capacity and there were four wine factories. The one factory still running produces not wine but vodka. Surveys indicate that local producers will not return to farming grapes until they are certain that they will be able to get US$ 0.15 per kg.
116 117
While the district suffers from water shortage, as the rest of the region, the emphasis on grain production, which requires less water than sugar beets, means water is less pressikng an issue than elsewhere.
Çulfa District
The Culfa district lies along the Iranian border40. The border traffic is usually comprised of merchants buying and selling electronic equipment, light industrial products, etc. In the winter months this traffic also includes perishable goods such as vegetables.
Culfa District has a population 37,000 of whom 90% work in agriculture. Culfa is the district with the most fertile land, and 41 percent of the land in the region is used for agricultural production.
Production in Culfa Region is indicated: Figure 15
Figure 15: Culfa regions production levels (as of 2001 in thousand ton) Beans Grains Spinach
Sugar beets
Potatoes
Chick Peas Vegetable Grapes Garden Produce Fruit (watermelon, tomato, etc)
As compared to Babek there is a larger range of produced material in Culha. In order to alleviate the water problem a reservoir has been constructed. Even though there is enough rainfall to collect high volumes of water additional solutions will have to be explored in order to increase agricultural production levels.
40 Nakhichevan citizens who want to travel to Iran must pay 30,000 Manats or close to US$ 6 in order to obtain a visa.
117 Considering that the population is more or less half that of the Babek District, the number of livestock is relatively similar (Figure 16).
Figure 16: Babek region livestock numbers Large livestock 11,164
Small livestock 70,062
Leather from this district is also sold to Turkish merchants who take the leather back to Turkey for further processing.
Another distinguishing factor for the Culfa District is high quality natural spring water. In the vicinity of the water spring there is a run-down hotel, which if renovated could be a potential source of income from tourism. There is also a carbon gas source at the same place where the spring water is found. This gas is used in the summer in air conditioning units.
Ordubad District
Ordubad, with a population of 42,000, is a mountainous region where livestock is the main occupation. Even so, its fruits – especially lemons, peaches and apricots - are famous world-wide for their taste and high vitamin content.
Ordubad’s 2001 production in 2001 was shown in Figure 17:
Figure 17: Products from the Ordubad region as of 2001 (in thousand tons) Sm all garden Fr uit Grain (watermelon, tomato,etc.)
Sugar beets
Vegetables Potatoes 119
Because of the mountains the region receives a lot of snowfall each winter and since livestock is the main income source as opposed to agriculture less water is needed to sustain productivity levels.
The distribution of livestock in the Ordubad District is shown: Figure 18
Figure 18: Ordubad region livestock distribution
Large livestock
Sm all livestock
Şahbuz District
The population in Sahbuz is 20,686. Sahbuz, like Ordubad, is very mountainous and its the main source of income is livestock (Figure 19).
Figure 19: Sahbuz region has the following number of livestock
Large livestock
Small livestock
During the summer the Sahbuz population increases as people from lower, and hotter, parts of the region come to the district. People have come to believe that Sah-Buz means ‘big-ice”. Sahbuz has a source of mineral water that is both plentiful and of high quality. The mineral water extracted from this reserve yielded 91,000 units of bottled water in the USSR period; current production has dropped 1,000 units. Sahbuz’s production in 2001 is shown in Figure 20:
119 120
Figure 20: Sahbuz region produced the following amounts of products (in 2001 in thousand tons)
Fruit Sm all gardens (watermelon,tomat oe)
Grain
Vegetable
Potato
As the above figures demonstrate, Sahbuz does not have significant agricultural production, however given the population the livestock numbers are relatively high. Sahbuz has the following distribution of livestock:
Serur District
The district with a population of 110,685 is the largest in NAR. The following products were produced in 2001 (Figure 21).
120 121
Figure 21: The following products were produced as of 2001 (in thousand tons)
Tobacco Grapes Fruit Grain
Small garden (watermelon,tom ato,etc.)
Vegetable Potato Sugar beet
The Serur District produces 90% of the region’s sugar beets and 64% of the fruit.
That said, the district with the largest share of production in NAR is struggling to increase the amount of irrigated land in order to continue to grow. It is the district with the highest demand for water. The reason behind this demand is that the products, which are raised on extensively irrigated land, bring in higher revenues. Pumps are being utilized to irrigate areas with water from the Aras River. In addition, there are 26 artesian wells within the region. Despite having a drought the previous year, irrigated land increased by 238 hectares.
During the socialist period Serur had many vineyards and there were four wine factories, none of which is currently in use.
One of the most important characteristics of Serur is that in addition to being a big agricultural producer it is also the region with the largest number of livestock. There are 221,632 livestock in the region, 31,632 of which are large and 190,000 of which are
121 122 small livestock. As in Babek, the livestock in Serur are also fed organic feed. The population uses 30 percent of their land to raise feed for livestock.
The developments in livestock production have also led to increases in the production of wool and leather. As in other leather producing districts, the leather is sold to Turkish merchants.
More than 15 individuals in the district stated that they have 1,000+ head of small livestock.
Sederek District
Sederek region, with a population of 12,233, is the only district which shares borders with Turkey, Armenia and Iran. The district produced products shown in Figure 22 and 23 in 2001.
Figure 22: Sederek region products from 2001 (in thousand Grape s tons) Grain
Fruit
Sm all garden (watermelon,to Sugar beet mato,etc.) Vegetable Potato
122 123
The district, know for its grapes and wine, still produces a diversity of grapes. The
Figure 23: Sederek region livestock numbers Large livestock 8,000
Sm all livestock 1,700 district, will lose its technical expertise in this area unless a grape/wine industry can be revived.
INFRASTRUCTURE SECTOR:
Energy
Electricity is one of the main problems hindering both social and economic development of the region. Before the blockade the region received electricity from Azerbaijan from the high voltage lines which passed through Armenia. The same route was the major transportation and natural gas link to Azerbaijan. The road and the natural gas pipeline were the main arteries of the supply chain. Natural gas was available to nearly all cities and villages. Almost all energy demand for heating during winter was met by natural gas. The road and natural gas networks have been disconnected since 1991.
Since gas and heating fuel is not widely available, most households in urban areas and some houses in rural areas use electric heaters for heating during winter. This is due to the fact that most households do not, in effect, pay for the electricity used. Collection rates from households are around 15-20%27 and only 40% of the households have electric meters installed. The number of meters in working condition is unknown. The result is that electricity consuming household appliances become the major heating source, especially since with the low levels of effective utility bill payment it has become the least expensive option for household heating. As a result, annual demand for electricity has grown from 1,080 MW in 1988 to 1550 MW in 2001. However the heavy dependence on electricity has overwhelmed the system. During winter season (November
27 Collections from organizations and businesses is estimated at 90%.
123 124 to March) only 35-40 percent of the total electricity demand is met by the current supply. The electricity is cut-off 16 hours a day. From April to October, around 60-70 percent of the demand is satisfied and cut-offs are only eight hours a day. The cut-off process is distributed equally among all neighborhoods; for example if one district has electricity for two hours, an adjacent district has a cut-off during the same hours. Power Generation NAR currently is supplied the majority of its power by importing electricity (Table 22). There are currently only two power generation facilities in NAR: two hydro- electric turbines on the Araz river (the other two turbines belong to Iranians) and a 15 MW diesel turbine in Sherur. Power generation is very limited in the region because transportation costs for fuel, gas or coal are high. It costs US$1,000 for a truck to carry 10 tons of fuel. Nakhichevan depends on Azeri government subsidies for the purchase of electricity from geographically continuous countries. Electricity is the single largest item in imports to the region.
Table 22: Power Generation MW 2000 2001 Araz Hydro 42 40 Gas Turbine 4 0 Electricity Purchase Turkey 436 430 Iran 256 370 Total 738 840 Source: Complied by Social Assessment, LLC, 2002
Compared to world energy prices, Nakhichevan buys electricity at relatively low rates. Turkey sells electricity at 3.5cents per Kw and Iran charges 4 cents.
There are a number of energy projects under preparation/consideration as the box below illustrates.
124 125
In Azerbaijan, several hydroelectric rehabilitation projects are in progress. When Demandcompleted, these projects should result in an additional 671 megawatts of electricity capacity. The 360-megawatt Mingechaur hydroelectric project on the Kura River is estimatedAnnual to cost demand $41 million for electricity and is scheduled was estimated for completio at aboutn in 2001. 1,550 The MW EBRD for 2001. Householdsloaned the accountscountry $21 for 83million percent to financeof the current the replacement electricity of consumption generators atsince the plant,industrial as demandwell as for to installelectricity environmental is very low, controls. the majority The Islamic of factories Development having shutBank down. and the In 1988, whenEuropean nearly Union’s all production Tacis City facilities Twinning were program operational, are cosponsoring annual demand the waseffort around [50]. Plans 1,080 MWare also annually. being discussed There has by beenstate p aower dramatic company increase Axerenerji in demand for a $42.5 for million electricity by householdsdevelopment following of small the hydroelectric interruption stations of the in gas the pipelineautonomous and Nakhichevan due to the increaseregion in transportation[51]. The most costs pro misingof coal schemeand liquid involves fuels to construction the region. of a 23.1 megawatt capacity four-station cascade on the Gilan river. Other proposed projects include a $9.8 million, 4.5-megawatt hydropower station on Collectionthe Vaykhyr river and an $85 million, 31.5-megawatt plant on the Ordubad River [52]. The Islamic Development Bank has expressed interest in assisting with the projects. AzerbaijanRevenue had considered collection potential is a major wind problempower development in Nakhichevan. for Nakhichevan, The Electricity but Administrationinitial studies showedfaces a challengethat every sincewind- generatedonly 40 percent kilowatthour of the wouldhouseholds cost twice have asmeters. Themuch hou asseholds a hydro are-generated charged a kilowatthour. fixed flat fee per month, regardless of the usage. However, only 25 percent of the households pay this flat fee. The banking system is not active in eitherAzerenerji accepting Toys electricityWith Nakhichevan bill payments Hydro orProjects,” providing Financial the clients Times: with East checkbooks. European HouseholdsEnergy Repor are tnever, No. 106disconnected (July 20, 2000),as a penalty p. 23. for non-payment.
Natural Gas Project The Government of Nakhichevan and Azerbaijan Energy are considering purchasing natural gas from Iran. The project consists of a pipeline to be built between Iran and Nakhichevan, building a power plant by using existing gas turbines and annual purchasing gas from Iran. ABB Alstom has prepared a draft proposal to the Government of Nakhichevan, which requires an initial investment of US$18 million for the pipeline and US$ 20 million for the power plant renovation.
The Electricity Administration believes that the monthly charge to the households will decrease to US$5 per month which is much lower than the actual charges of US$20 per month today. The Administration believes, since energy would be more affordable, collection rates will might increase.
Water Supply
There is safe water through connections for every household in Nakhichevan City. There are frequent cut-offs during summer season. Usually water goes out for two hours in a district while a neighboring district has water. Water outages often occur for 12 hours every day. In government buildings, organizations and enterprises, water is usually available. Electricity cut-offs also affect the water supply for apartment buildings higher than 15 meters, where the water pumps do not operate. Nakhichevan City’s water supply is heavily dependent on rainfall during the rain season and is around 6.2 million cubic meters per annum. Water demand is estimated at 9 million cubic meters per annum or 45
125 126 percent higher than the annual supply. Household water demand is 1.9 million cubic meter annually or about 30 percent of total demand.
Nakhichevan City Water Administration collects 30-35 percent of the billed water consumption of households. Revenue collection from governmental and private entities is around 50-55 percent. Water tariffs are 7-8 times lower than in Baku. The price of 1 cubic meter of fresh water is 50 manats (1 cents US) for households, 140 manats for government related organizations and 150 manats (3 cents US) for private enterprise.
Azerbaijan has started to decentralize national water supply and wastewater management responsibilities to local governments and agencies in charge of rural water supply into the Committee for Housing and Communal Property (CHCP). Unlike other regions, however, NAR does not have water and wastewater utilities (vodokanals) under the supervision of the CHCP. The provision, control and management of urban and rural water and sanitation services in the six districts of Nakhichevan are controlled by the
Nakhichevan Housing and Communal Services Committee. Because of the lack of reliable data it is difficult to pinpoint the exact water and sanitation service levels and quality in the NAR. In general, however, facilities are in a poor state, lack maintenance, and the resources needed to update facilities are not available.
The sector’s technical problems are tied to a financial crisis resulting from: (i) tariffs that area too low to cover operations, maintenance and replacement costs; (ii) low collection levels from consumers; (iii) of collections, low level of collections in cash; and (iv) subsidizing domestic consumers from other customer categories which reduces the incentives for households to conserve water and does not target subsidizes on the truly needy.
Reforming the water and wastewater sector in general in Azerbaijan, and notably in NAR would require a major effort including: (i) rehabilitating existing plants and networks to prevent systems collapse; (ii) increasing plant and network efficiency to reduce operating costs; (iii) institutional strengthening and capacity building to improve productivity and commercial performance; (iv) expanding water supply and wastewater services to those presently unserved; (v) expanding wastewater treatment coverage.
NAR is currently in a situation in which the usual recommendations for improving the water and wastewater sector – increasing cost recovery, investing in efficiency
126 127 improvements, etc. – may not be wholly realistic given the relatively low level of economic activity of the region in contrast to other parts of the country and given the already high levels of income that have to be used for food.
Transportation
The main road that connected Nakhichevan to Azerbaijan was destroyed during regional conflict. The road provided crucial facilities for gas and electricity transmission, and transportation with the rest of Azerbaijan for the supply of basic goods and for other exports and imports. The road system within NAR consists of the elements shown in Table 23:
Table 23: Transportation
Roads (in km) Total roads Main roads Local roads Total length 2,046 825 1,221 Asphalt-concrete 251 235 16 Paved 628 400 228 Clay roads 612 160 452 Country roads 555 30 525 Bridges (in pcs) 200 132 68
Length of bridges 3,760 3,260 500 (in m) Complied by Social Assessment LLC, 2002
Social Infrastructure
Health and education are two of the most critical sectors in need of development in Azerbaijan generally. In the post-Soviet economy both health and education have faced great challenges and consequent declines. To strengthen the Republic as a whole, and more specifically impoverished and neglected regions such as Nakhichevan, budget allocations have been increased for both sectors28 in addition to further examination of strategies targeted at the improvement of existing infrastructure and services. Studies conducted on Azerbaijan suggest that the poverty of the Nakhichevan region is disruptive (an outlier) for Azerbaijan as a whole because the region suffers from great structural problems. The health sector is experiencing a particularly acute crisis as a lack of attention to elementary disease control and anti-epidemic measures have resulted in the resurgence of infectious diseases such as TB and Malaria among others. Education has experienced overall challenges that are most prominently reflected in the very poor who cannot afford the costs of higher education. The I-PSRP29 strongly advocates addressing
28 NAR’s regional budget allocates 60% of its expenditures to the education sector. 29 IMF/IDA, 2001. IMF/IDA Interim Poverty Strategy Reduction Paper June 5 2001.
127 128 problems in the areas of primary health and general schooling, however the government has not yet clarified plans for financing the delivery of education and health services.
Health.
Because very little data exists on Nakhichevan, it is difficult to draw accurate conclusions about the conditions of the health infrastructure in the region. It can be inferred that because it is the poorest region of the Azerbaijan Republic the available health infrastructure will be consistently challenged as government funded programs compete for available funds.
In 1996 UNICEF collaborated with the Ministry of Health (MOH) of Azerbaijan to establish a district health care reform pilot program aimed at reforming the financing and delivery of primary health care (PHC) to ensure access to effective, efficient and equitable health services.30 Evaluation of this project provided evidence justifying the further development of this program within the health sector. As a result, these initiatives were expanded and an evolving model for further district-level pilot programs was established placing greater emphasis on specifically proposed objectives and targets. This in collaboration with the designation of Nakhichevan as the poorest region in the Azerbaijan Republic supported the furthering health sector programs in Nakhichevan.
The 2001 Health Reform Project funded by the World Bank supported a health infrastructure rehabilitation program designed to improve the health of poor populations by specifically targeting rural and/or geographically isolated districts. This program was initiated partly in response to reports about the quality of health programs in the region.
The Bank funded the expansion of the UNICEF-supported pilot program into several regions of the Republic in attempts to extend district level PHC reforms and build capacity within district health services. Two districts in Nakhichevan, Sarur (inclusive of Sadarak) and Babek (used as a control district), were included in this 10 district based project. The implementation of this component of the project is being completed in four stages to be followed up and evaluated by the MOH and international technical assistance agencies upon its completion.
The Sarur region was selected because it is the most highly populated region in Nakhichevan (111,614 people). Little data were available for NAR on mortality, and infectious disease rates, medical personnel, and vaccine rates. The data provided from the initial stages of this program show infant mortality rate (IMR) as the only reported health data for the Sarur (15.8) and Babek (22.8) regions which can be compared with the national average (16.5). As with other data, NAR is in a much worse situation than for Azerbaijan as a whole.
Key indicators which will be used to put into operations the project’s development objectives are: (i) development of a midterm strategy by the government for
30 World Bank. 2001. The Project Appraisal Document on a Proposed Learning and Innovation Credit to the Azerbaijan Republic for a Health Reform Project.
128 129 health reform; (ii) development and use of district-specific annual work plans by district health authorities; (iii) development of a policy paper by the government on improving health services and access for the poor; (iv) improvements in access quality and utilization of primary HCS; and (v) and increased knowledge among staff in each MOH about PHC strengthening and reform.
According to a 2001 UNDP report on Azerbaijan, there were 56 hospitals in NAR, with 800 doctors and 2,708 medical workers. In addition, there were 87 women health clinics, children clinics and ambulatory centres with 329 workers.31 As compared to the 2000 reported figures of 677 physicians, 53 hospitals, 103 ambulatory services it appears that there may have been slight increases in the number of physicians and facilities providing services to people in Nakhichivan.32 However these differences are difficult to validate because so little research has been conducted on the region.
Furthermore, there are many internally displaced people living within Nakhichevan who are in need of general health services and support. The plight of these groups, in addition to that of the Nakhichevanians who live in areas frequented by conflict, brings to light another problem faced by health care infrastructure that is frequently neglected: the strength of its mental health services. Displaced groups often necessitate increased services to address basic health needs, infectious disease and stress disorders. For these reasons and more it is imperative that assessments and interventions for the health infrastructure and services of the Nakhichevan region are established.
Education:
As expressed in the Poverty Assessment, education is one of the highest priorities for the people of the Republic. Nakhichevan was included in a pilot study that allowed for schools in the Sarur region to experience improvements as part of an assessment project aimed at determining the needs of educational systems in the region.
According to 1998 data, there are 232 schools in NAR, of which 13 are primary, 23 secondary, and 196 are middle level. More than 71,800 children are enrolled in these schools (263 in primary schools, 1761 in secondary schools, and 69,774 in middle schools). Nakhichevan employs 8,189 teachers, and there is a university (Nakhichivan State University), which has 2,053 full-time and 710 part-time students.33 Furthermore the region has 293 libraries, more than any other region of Azerbaijan.
However, due to the fundamental economic problems the region is facing, further investment in education is considerably limited. Regardless, the Nakhichevan authorities have decided to allocate up to 60% of total budget expenditures for education.
31 UNDP, 2001. Project of Azerbaijan., SPPD Document. 32 Independent Azerbaijan Statistics book. 33 World Bank, 1999. Education Reform Project.
129 130
Surprisingly there are not vast differences between education levels based on gender or geographic location in NAR. For example, in high school, the most common Nakhichevanian education level, rural residents seem to fare better than urban. On the other hand, the urban residents seem to have preferred “Teknikom”(similar to vocational programs where a physical skill or trade is learned) rather than classical high school education programs. Both the high and the low ends of the education level (university vs. illiteracy) are rare. Only 0.33% of the population are university graduates, at one end, and only 1.4% percent are illiterate. And these rates are also similar between male and female Nakhichevan residents.
Regional variations for enrollment and extended absences may have a number of causes. They may in part be based on the devolution of management of general education since the 1992 Education Law, which forced regional authorities to decrease variations in school quality. Additionally, the variable impact of IDPs may factor into the provision of educational services or ability of school attendees.
Finally, many children may be attempting a balancing act between work and education based on a need for their assistance as wage earners within the family structure. This may be the case although regional variations in enrollment and absence rates do not consistently reflect regional poverty rates. It is clear that educational programs need strong assistance from the Ministry of Education for infrastructure changes as well as surveillance of trends such as regional enrollment, and for the development of national policies addressing regional variations in education.
The Education Sector Reform Program document of 1998 raised areas of concern within the education system such as isolated spheres of education exist
130 131 within Azerbaijan and insufficient progress on fundamental reforms.34 For example, from grades 1-4 books and supplies are provided for free for all students, however from grades 5-11 there is a charge for books and supplies and contribution fees are expected of all students. For teachers, data that suggests that there are enough teachers for all classes and grades do not show that some teachers work part time or have many classes to teach. Therefore, data reflecting enough teachers to teach
“each class” may represent a few teachers teaching all of the classes.
Peoples perceived problems and priorities with respect to physical and social infrastructure development
The 2002 survey of People’s Priorities has explored a large number of questions concerning the objective and perceived problems that rural and urban populations of the Autonomous Republic face. When they are asked what their major problems were a great majority pointed to low income, salaries, wages and pensions. There is little doubt that poverty is perceived as the overriding problem, with solutions expected through improved wages, salaries, pensions, and other types of pay from formal income (Table 24).
Table 24a: PERCEIVED PROBLEMS (Most Important) Percent Do not have any regular salaried income 31 Have low salaried income, has to do other work on the 11 side Have salaried income, but salary is irregular 5 Have low salary, but paid regularly 29 Have low salary, but paid irregularly 2 Have pensions, but it is very low 16 Have pensions, but receive it irregulary 0 Have pensions, but it is both low and irregular 1 Engage in private sector activity (informal jobs etc), but 1 does not generate enough money Engage in self-production in household plot, but it is not 4
34 The Ministry of Education of the Republic Of Azerbaijan, 1998. Education Sector Reform Program. Baku-1998.
131 132 enough Other 1 TOTAL 100
Table 24b: PERCEIVED PROBLEMS (Second Important) Percent Do not have any regular salaried income 5 Have low salaried income, has to do other work on the 8 side Have salaried income, but salary is irregular 3 Have low salary, but paid regularly 8 Have low salary, but paid irregularly 4 Have pensions, but it is very low 31 Have pensions, but receive it irregulary 0 Have pensions, but it is both low and irregular 1
Engage in private sector activity (informal jobs etc), but 2 does not generate enough money Engage in self-production in household plot, but it is not 34 enough Other 4 TOTAL 100
They have described their current living standards as dismal (Table 25) and very bad in comparison to earlier decades.
Table 25: PERCEIVED LIVING CONDITIONS Percent We are in very bad condition, living on subsistence 53 We cannot shop as we want, money is not adequate 34 We have money for daily items, but have trouble for costs 8 of weddings, ceremonies etc. We have problems with major purchases, but overall we 3 are fine We do not have enough cash, but our garden production 1 is enough We do not have any problems with our economic 0
132 133 situation Do not want to answer this question 1 Other 0 TOTAL 100
Nakhichevan has faced developmental challenges to its physical and social infrastructure that have contributed to the conditions of poverty and left the region in dire need of sector-wide rehabilitation. Declines in health, social, education, economic, agricultural, and trade related sectors have allowed for poverty to remain prevalent within the region. Furthermore, Nakhichevan faces additional developmental challenges based on its geographic land-locked position between the borders of Iran and Armenia (with which it also has frequent conflict) and its separation from mainland Azerbaijan.
Based on these challenges, the Survey of Peoples Priorities investigated perceptions about the need for physical and social infrastructure changes. Selections for physical infrastructure improvements indicate that roads within the community are almost unanimously considered the top priority across districts within Nakhichevan. Other priority areas include water and sewage control and the provision of electricity. (Table 26) The overwhelming majority of people surveyed also believe that improvements in social infrastructure should focus on the rehabilitation of Hospitals and Polyclinics. Additionally, a high priority is placed on educational programs beyond that of kindergarten. (Table 27) Clearly the top priorities in social and physical infrastructure can be linked (if only superficially) in that the poor condition of roads and streets in communities will lead to more accidents and other adverse health events, necessitating increased utilization of health services which are reportedly in need of upgrading and education will be challenged in settings where no electricity is present.
Table 26: Top Priorities for Physical Structure Rehabilitation
Region Sadarak Sharur Babek Nakhichevan Shahbuz Julfa Ordubad
Roads in 72% 52% 78% 24% 84% 96% 86% Community
Roads out of 5% 4% 7% 8% 9% 0% 4% Community
Market Places 14% 1% 2% 18% 7% 0% 2%
Water and 9% 14% 9% 36% 0% 4% 2% Sewage
Electricity 0% 29% 0% 14% 0% 0% 6%
133 134
Also transportation is a main concern because Nakhichevan is landlocked. Inadequate road infrastructure has limited mobility within the region and between Nakhichevan and other regions of Azerbaijan. For this reason, and because Nakhichevan is not regularly a major trade route, the price of goods (agricultural and other), are currently the highest in the Azerbaijan Republic.
Table 27: Top Priorities for Social Structure Rehabilitation
Region Sadarak Sharur Babek Nakhichevan Shahbuz Julfa Ordubad
No Answer 0% 0% 0% 1% 0% 1% 2%
Hospital/ 91% 83% 77% 55% 75% 97% 70% Polyclinics
School 9% 17% 18% 22% 25% 1% 12%
Kindergarten 0% 0% 4% 7% 0% 0% 3%
Post Office 0% 0% 0% 3% 0% 0% 8%
Family Entertainment 0% 0% 0% 5% 0% 0% 2% Places
Retirement 0% 0% 1% 4% 0% 0% 1% Home
Public Baths 0% 0% 0% 1% 0% 0% 1%
Transportation 0% 0% 0% 1% 0% 0% 0% Centers
134 135
The Enterprise Sector
This section describes the current status of the enterprise sector in Nakhichevan, including the industrial culture, labor skills and markets/supply chain inherited from the Former Soviet Union.
Before the collapse of the Soviet Union, most of the production of companies in Nakhichevan was related to agriculture. The main agricultural inputs were grapes, fruits and vegetables which were processed into wine and conserved food. Less prominent but still important manufacturing was done in garments, glass and bottles, basic electric household appliances and carpets. Companies were owned by the government and to a very large extent were established to make use of used machinery and equipment from similar factories in Russia which were either being closed down or renovated. Therefore, essentially all the existing manufacturing machinery in Nakhichevan is today obsolete.
The production system for many companies was based on importing finished or semi-finished products from other parts of the Soviet Union. This USSR-wide supply chain was based on access to the railroad network which connected all major production centers in the Soviet Union. In addition, the railway connecting Nakhichevan allowed the region to export its cash crop harvests such as tobacco and cotton as well as bottled wine, vegetables and fresh and conserved fruits.
With the fall of the Soviet Union, which began the transformation of the railway system in general, and the conflict with Armenia which broke the railway link physically, this marketing and input supply system, including regular access to electricity and natural gas, disappeared. Nearly all domestic production activities has therefore stopped.
The UN consultants carried out a series of surveys of companies and people in the region. The following table 28 shows the enterprises and their industries that were surveyed:
Table 28
Visits Operational Industry Products Markets
Domestic and Duzdagi Yes Salt mining Salt Azerbaijan
Trikotaj Yes Apparel Military uniforms Turkey Military uniforms & Turkey and Tikis Yes Apparel underware Azerbaijan
Electroteknika Chairs and desks Domestic Zavodu Limited Steel frames for schools
135 136
Beer, fruit juice, Naxcoop Yes Retailling bread Domestic Sparkling spring Mainly Badamli Yes Bottled Water water Azerbaijan
Conserved fruits and vegetables Konserv Processed (currently Zavodu No Foods producing spirits) Domestic
Carpet Qali Zavodu No ManufacturingWool carpets Piva Zavodu No Brewery Beer Cam Zavodu No Glass Glass bottles Corek Zavodu Yes Bakery Bread Domestic Wood Mebel Zavodu Yes Products Furniture Domestic
Tikinti Materyallari Building Various building Kombinati Limited Materials materials Domestic
Babek Uzum Grape Domestic and Emali Zavodu Limited processing Spirits, Vodka Azerbaijan
Small Businesses
Sugar cube producer Yes Domestic
Flour Importing and wholesaler Yes wholesaling Flour Domestic
Household appliances Lighting products, retailer Yes Retailling electric appliances Domestic
Food, beverages Small retailer Yes Retailling and daily items Domestic Bakery and Café Yes Retailling Bakery products Domestic Shoe Repair shop Yes Domestic Pharmacy Yes Domestic Furniture shop Yes Domestic Ready to Wear Retailer Yes Domestic Shopping Mall Yes Domestic Source: Enterprise Survey, Social Assessment LLC., 2002
136 137
The survey looked at 24 enterprises, both large and small, and both publicly and privately owned.
In the public sector government owned factories (zavod) were surveyed in nine different industries. Immediately after 1991, production stopped in nearly all factories due to the blockade of the region. The national Azeri government has awarded some of these factories with new contracts in the last five years to create employment and to benefit from the facilities to the extent that they could function. In addition some companies tried to sell their traditional products in the Azeri market, although facing higher transport costs and electricity disruptions which put them at a comparative disadvantage to others in Azerbaijan. In a few cases, companies in NAR tried to produce new products for traditional markets. For companies with very weak demand for their products, production has been shut down with small management staff working on future possibilities including finding markets and customers, privatization, liquidation or operating in different industries with existing machinery.
Individuals in the survey of government enterprises were in most cases general managers over 50 years old. In all other forms of ownership, managers were also surveyed. All of the participants were male. Average enterprise age was 23 years with a wide spread between government enterprises established during the Soviet period and private enterprises mostly formed after 1997. The legal/ownership form of the companies surveyed is in the figure 24 below.
Figure 24
Legal Forms of the enterprises surveyed
Joint stock company 17 %
Limited Liability - Small Business Cooperative 54% 25% S tate owned enterprise 4%
Source: Enterprise Survey, Social Assessment LLC., 2002
The managers/entrepreneurs interviewed have extensive education and experience in their fields as the graph below illustrates. Managers in the state-owned enterprises had on average more than 15 years of experience, which means that most had limited operating experience before the fall of the Soviet Union essentially shut down the manufacturing sector in NAR. The entrepreneurs have less formal experience in their fields but as they have invested their own capital they have exhibited initiative, and established more relations with foreign businessmen, and have learned more market- based marketing and management skills than those in the state-owned enterprises.
137 138
Figure 25
Educational Profile of the managers
13 % High School 37% 21% Technical Education University Mas ter s 29%
Source: Enterprise Survey, Social Assessment LLC., 2002
For larger firms, the most frequently mentioned problems were the lack of capital/credit, the condition of the machinery, high costs of importing and exporting, and access to markets. For small and medium-sized companies weak domestic demand was among the biggest problems affecting the businesses. The average age of the machinery and equipment is 17 years with very old stock for publicly owned companies in contrast to new private enterprises. Due to the age of the machinery many older companies suffer from frequent breakdowns and interruptions in production as well as generally low quality compared to international standards.
More than 50% of the survey respondents mentioned that they believe they would benefit from training in order to excel in their fields with marketing and general management as the highest priorities. Further investigation revealed that none of the respondents who want to receive training thought that training in import and export was necessary. This can be explained by the fact that, Nakhichevan entrepreneurs do not perceive that growth and development will be achieved by trade or they do not think that they can export their products. The distribution of the fields are summarized below:
Figure 26
Distribution of training needs fields for enterprises
17% 8% 17%
Accounting 0%Technical 25% Legal 33% Mar keting General Management Pr oduc tion
Source: Enterprise Survey, Social Assessment LLC., 2002
138 139
The largest enterprises in terms of employment were the garments factories and the Nax Koop-ittifaq; each employing more than 1,500 people. 90% of the employees in the garments industry were female. Out of 6,380 employees in 24 enterprises surveyed 4% of the employees are seasonal workers. Due to the nature of business (apparel, food processing, beverage) number of female employees is as high as male employees. Although Azerbaijan is a Moslem nation, the Soviet system integrated women into the workforce although not into management. Average wages per month for are 150,000 manats (around US$ 40) for the enterprises surveyed. The social security tax is 29% of gross salary with an additional 2% taken for the unemployment fund.
Figure 27
Characteristics of Employment 50% 42% 50%
40%
30%
20% 3% 4% 1% 10%
0% Manager ial Seasonal Seasonal Male f ull Female f ull male female time time
Source: Enterprise Survey, Social Assessment LLC., 2002
The Badamli Spring Water Factory
In the Badamli spring water factory, where the production was done during summer, two groups of 70 employees shared employment in the same factory. The first group worked Monday through Wednesday and the second group worked Thursday through Saturday. The manager mentioned that his village was so poor that he wanted to give some employment opportunity to every family in Badamli village. In this village of the Shahbz district with 130 households, one or more members of 50 households35 work in Turkey usually in construction, seasonal farm work during and in very low paying jobs in cleaning and ironing.
35 For example, all four sons of the Badamli water spring factory production manager has 4 sons, work in Turkey.
139 140
Ng and Yeats (2002) analyzed the production characteristics of landlocked countries and found that they tend to perform assembly operations based on imported components rather than producing parts and components for export. They found that the share of parts and components in total exports of their sample of landlocked countries is small, often less than one percent. This is also true of Nakhichevan whose blockaded situation has produced high transportation costs, energy problems, and a delinking from traditional sources of input supply and markets for products. Most of the raw material being imported (transported) to Nakhichevan comes from Azerbaijan as the graph below shows. Survey respondents mentioned that raw materials or equipment from Turkey are expensive compared to Iran or Azerbaijan although logistics with Turkey is easier and transportation is less expensive. For small importers, however, there are informal customs and transportation costs.
Figure 28
Direction of raw material procurement
Iran 24% 42% UA E Turkey Azerbaijan
10%
24%
Source: Enterprise Survey, Social Assessment LLC., 2002
A recent survey among international freight forwarders tried to identify the logistical friendliness36 of individual countries, or how “easy” or “difficult” individual countries are perceived to be from a logistical point of view. The concept of logistical friendliness (or unfriendliness) refers to the ease of arranging international freight operations to/from a particular country.
The survey was conducted in November-December 2000 by approaching 60 different freight forwarders through e-mail. Among other questions, each respondent was asked to rate a set of pre-determined countries as to what extent he/she perceived a country as logistically “friendly” or “unfriendly”. The countries included in the e-mail questionnaire were based on the 90 countries included in the Corruption Perception Index (CPI) collected by Transparency International and Goettingen University37. Countries with the lowest level of perceived corruption were assigned 10, whereas countries with the highest level of perceived corruption were assigned 1.
36 Murphy, P.R. and Daley, J.M. (1999) "Revisiting logistical friendliness: perspectives of international freight forwarders", Journal of Transportation Management, Spring 1999, 65-71. 37 see: http://www.gwdg.de/~uwvw/
140 141
The combined indicator for logistical friendliness in the survey is the percentage of the responses, which stated that a given country was either logistically “friendly” or “unfriendly”. One respondent out of six rated Azerbaijan as “logistically friendly”, hence logistical friendliness is 17 percent. By comparison, all the respondents regarded Russia as logistically unfriendly; consequently, that country’s ranking is 0 percent.
A Ranking of Countries in the Logistics Friendliness Survey Against Corruption Perception Index, 2000
Figure 29
100 % "Logistics m ore friendly" 90 % Correlation coefficient = 0.784 80 %
70 %
60 % EU countries 50 %
40 % Azerbaijan 30 %
20 % Armenia
10 % Typical former Soviet Republics Least corrupt 0 % 0,0 1,0 2,0 3,0 4,0 5,0 6,0 7,0 8,0 9,0 10,0
Source: Enterprise Survey, Social Assessment LLC., 2002
The results are only indicative and somewhat anecdotal, since they are based on a small number of responses (nine for Armenia and six for Azerbaijan), all of which are highly subjective assessments based on hands-on experience. However, despite the somewhat skewed distribution of the respondents, the small number of respondents, and the highly simplified concept used, the results show a striking correlation between the logistics friendliness and the CPI. This is a strong indication that the less perceived corruption there is in a country, the easier it is to trade and arrange logistical activities.
141 142
The logistical costs of a movement are not just the direct monetary costs, but also involve additional expenditures of time to physically pass the border, undergo the associated procedures, and finally, to clear customs. The total time and money expenditures represent the total logistical cost of the consignment movement.
The enterprise survey also looked at a number of other areas.
Electricity and roads are the main problem areas for NAR companies in terms of infrastructure. State enterprises mentioned that they have preferential access to electricity, therefore when there is a planned cut-off, they often receive an exception from the electricity administration and continue production. In contrast, private companies have to use their own emergency diesel generators which are very expensive compared to electricity.
Most NAR companies use banking services for simple transactions and payments. None of the enterprises have used any credit lines or financing from commercial and government banks. All the enterprises think that credit mechanisms should be extended. 90% of the respondents have answered that they need capital and loans in the “Expectations from the Government” section of the survey.
In terms of markets and selling, the companies complain about weak domestic demand and buying power of the people in Nakhichevan. Respondents complain that they do no longer have access to Russian markets because of the blockade.
With regard to how survey respondents looked at the enterprise sector’s contribution to the future of NAR, the main findings are:
• Nakhichevan should focus on its own agricultural production as inputs for industrial production. Processed fruits, vegetables, juices and processing of industrial crops such as tobacco, grapes, cotton and corn which have less dependency on imported raw material, electricity and working capital should be encouraged.
• The current stock of machinery and equipment is obsolete and no longer suitable for quality products. Buildings and covered production areas have suffered from lack of maintenance since production was halted in most companies in the last ten years, and they would need major improvement before restarting production.
• Labor skills were high during the 1980s.38 The current labor force has not had advanced training in Russia or has migrated to work in Baku or in other countries.
• Due to the lack of new machinery and technology, lower quality products are produced which need to be produced in large-volumes. However, products in
38 After technical education in NAR, some workers were trained for five years in Russian factories and then brought back to Nakhichevan as high-skilled labor force.
142 143
apparel and agriculture have a high transport cost component which puts NAR at a disadvantage.
• Support sectors for many important products are missing in Nakhichevan due to lack of capital and lack of entrepreneurial skills. Many small items need to be imported for the production of final goods.
• Most new companies are small because entrepreneurial opportunities are limited by the small size of the domestic market.
• Substantial emigration has eroded the supply of skilled labor, entrepreneurs, and innovators.
39 • Capital accumulation is a lengthy process . There is no commercial credit facility in the region so entrepreneurs can have assistance to grow their businesses40.
• Limited entrepreneurial skills. Participants in the private sector often lack entrepreneurial skills because they could not be developed during the country’s participation in the vast centrally planned Soviet system.
• As there is currently no foreign investment in the enterprise sector in Nakhichevan, it is difficult to imagine this will occur without substantial subsidy.
39 Although the oil trade between Turkey has helped the regional trade activity, it has been observed that people who can do this trade is the large petroleum truck owners, mostly coming from Iran. The people in Nakhichevan can only benefit from the side sectors in this trade. 40 Discussions with the IFC and local bank managers indicated that Azeri banks do not have sufficient capital to give loans even in Baku. It would be optimistic to expect Nakhichevan branches of Azeri banks to get access to more financing capital in the near future.
143 144
Peoples’ Priorities
The survey has also tried to establish what people would have done themselves if they had the resources. One of the techniques was a three layered open-end questionnaire asking people: “What would you do if you were given (i) $500; (ii) $5,000; and (iii) $50,000. The responses were classified under four categories: investment, necessities, financial and quality of life. Furthermore, the responses were separated geographically into rural and urban, and also economically into poor, middle income and rich.
• $500.00 Section:
In the rural responses, livestock emerges as the clear dominant priority followed by agriculture, food, home improvement and family needs respectively. 29% of the rural respondents stated livestock as their primary commercial choice while 9% chose agriculture. Another striking finding is that in the necessities section the primary choice is food for rural families, indicating that food security is a challenge even for those living in agricultural areas.
In the urban side of the survey, home improvement emerges as the highest priority followed by debt repayment, food and family support. Possibly, the urban respondents did not choose commercial activities as a primary response because the size of the offering ($500.00) is insufficient to start non-agricultural/livestock based business. In any case, commerce surfaces as the primary choice in terms of commercial activities in urban responses. On the other hand, home improvement may be the priority of choice in this case due to high home ownership coupled with weak infrastructure and long periods of poverty and war.
1. • $5,000.00 Section:
Except for the poor, the livestock emerges as the choice among rural respondents. Only among the poor, water is a priority and artesian wells are the priority. The increase in the amount offered is expressed as commercial activities becomes more popular than necessities.
On the urban side, there are two dominant responses; commerce (starting a small/medium enterprise) and home ownership. The fact that urban residents yearn for a new house though home ownership level is high reflects the low living standards and infrastructure quality existing in Nahkichevan today. Another response that emerges in the $5,000 level is transportation. Urban responses depict transportation as a commercial activity choice along with commerce/small business.
• $50,000.00 Section:
144 145
When the amount offered is increased to $50,000, land and agriculture based commercial activities become the priority for rural respondents from all income levels. Interestingly, the second most popular response is manufacturing, again regardless of the income level except among the poorest where a sizable respondents claim they would not need or want the money.
As for rural respondents, the most popular response in urban areas is that the participants do not want/need the money offered, as indicated by 32% of respondents. This may be happening because of a lack of entrepreneurial culture. This is followed by small enterprise/business, which is not surprising in the urban context. Finally, land and agricultural activities, a popular choice regardless stands out as the third most popular response.
The results obtained leads to two important conclusions about the priority preferences of the people of Nahkichevan population: (i) poverty is significant, causing food and other necessities to be a priority for people, especially at the lower end of the income spectrum; and (ii) though a certain entrepreneurial spirit exists, it is limited and still naissance due probably both due to the condition of the general economy and the heritage of the Soviet Union era. The business ideas conceived are generally agriculture/livestock related. Manufacturing and service related ideas are limited.
Issues relating to Income Generation. Another section of the survey of peoples priorities looked at the two most important problems families face when it comes to income generation. The major problem stated by the respondents, regardless of income level or geographic location is the lack of a regular salaried income. This problem is especially apparent in the rural participants’ responses while the on the urban side, the problem is not dominant at least on the higher end of the income spectrum - only 6% of the participants point out not having a regular salaried income as their major economic problem. Both on the rural and urban sides, the other major economic problems stand out as low salaries and pensions. A final interesting point is that even on the wealthier side, rural respondents cite not having a regular income as a major problem. As a second most important problem, rural respondents cite having to engage in household production but not being able to generate enough income through this activity.
Related to issues of income, the survey of peoples priorities asked respondents to describe their current living standards. Both in urban and rural responses “We cannot shop as we want, money is not adequate” and “We have money for daily items, but have trouble for costs of weddings, ceremonies etc” are two that stand. The exception is the highest income level in urban respondents. Another important observation is even the poorest of the poor, people shun away from depicting their financial state as “We are in very bad condition, living on subsistence”. This may be due to cultural reasons or to the fact that people are reluctant to reveal that they are living on aid even if they really do so. Finally, 21% of the wealthiest in urban respondents described their economic situation as “We do not have enough cash, but our garden production is enough”, indicating that the role of agricultural production is high even in the urban sector and among those who are more wealthy.
145 146
Trust and Vision. Another part of the survey of peoples priorities looked at issues of trust and peoples’ views on who people feel can help them solve their daily economic problems.
Most of urban and rural participants believe that neighbors, relatives or friends are their most trusted source to solve their families’ problems (Table 28 & 29). Except for the highest income level in urban areas, almost half of the respondents in each sub group go with this choice. Only wealthy urbanites mentioned the choice “We do not trust anybody other than ourselves” becomes more popular, probably reflecting the well known effects of urban life style. A possible reason for this divergence can be that while traditional Azeri family is rather co-dependant, this is not as true for the urban population. While this answer is also relatively popular among rural participants, the relationship between its popularity and income level is absolutely opposite in the two subgroups. While the relationship is positive in urban respondents, it is negative with the rural ones. The rural participants also seem to trust the local government officials, while this is not so for urban participants. Reasons for this maybe that in rural areas inhabitants are able to form personal relationships with these public servants or these officials’ importance may be magnified. Finally, it is worthy to note that almost 24% of the urban participants have opted not to answer this question.
Money and Banking. They survey assessed peoples’ relations with the banking sector. Both urban and rural respondents (in all income levels) predominantly state that they have not used banks for borrowing or savings. The likely reason for this is the almost non-existence of a commercial banking system in the traditional sense in Nahkichevan. The banks have stopped offering credits and due to the overall low wealth accumulation, there are almost no deposits in the system.
Table 29: PERCEIVED LIVING CONDITIONS Percent We are in very bad condition, living on subsistence 53 We cannot shop as we want, money is not adequate 34 We have money for daily items, but have trouble for costs 8 of weddings, ceremonies etc. We have problems with major purchases, but overall we 3 are fine We do not have enough cash, but our garden production 1 is enough We do not have any problems with our economic 0 situation Do not want to answer this question 1 Other 0 TOTAL 100
Table 30: TRUST Percent Local level government officials (police, etc.) 19 Higher level government officials 7
146 147
My superiors at the State enterprise 2 My superiors at the private enterprise 1 My neighbors, friends or relatives 47 Local, Azeri non-governmental organizations 0 Internal associations 1 We do not trust anybody other than ourselves 19 Other 3 TOTAL 100
Damage Assessment Report of ARRA.
In preparation for peace and the potential massive return of displaced people to the areas of Azerbaijan presently occupied, UNHCR, in close partnership with the World Bank and UNDP, has been promoting contingency planning and the design of an international strategic framework for assisting the Government of Azerbaijan to address the challenges of post-conflict resettlement, reconstruction and rehabilitation of war-torn areas. These efforts, which have focused on war-damaged areas to which the displaced can already return in safety, resulted in the creation in 1996 of the Azerbaijan Rehabilitation and Reconstruction Agency (ARRA). ARRA is responsible for rehabilitation of liberated areas and repatriating Internally Displaced People (IDPs). The Government's Program is a comprehensive, multi-sectored resettlement and reconstruction program based on extensive damage and social assessments in the war- damaged and formerly occupied areas, including parts of NAR, that were carried out by ARRA.
According to the report prepared by ARRA, the total damage caused by the conflict between Armenia and Azerbaijan to Nakhichevan was US$9.9 million. The greatest damage was to agriculture and power supply, as demonstrated in the following table:
Table 31 Damage on Nakhichevan USD (thousand) Agricultural Sector 2,885 Power supply equipment 2,654 Dwellings 2,401 Education 1,878 Health Services 24 Agricultural and Industrial Enterprises 11 Total Damage 9,853
Community Development
147 148
A number of organizations have funded community and individual schemes particularly in water supply and economic development. International Organization for Migration has supported community initiatives to rehabilitate portable water systems in 22 village systems; IOM contributed US$134,000 and 24 percent of project costs were mobilized from local communities in 1999-2000.41
The IOM also initiated a general loan program in NAR which had the following objectives:
• To alleviate poverty in the region by development of agriculture and entrepreneurship by providing micro loans and business training to low- income groups and to develop local community based organization to carry on these activities in a sustainable fashion. Finally, the project also targets at mitigating the water scarcity problem in Nakhchevan by rehabilitating the water systems;
• To support rural women from low income families in starting up sustainable business activities by providing training and financial assistance; and
• To preserve and promote the skills for rehabilitating water supply systems in order to rejuvenate these systems for use of the general population.
The Loan Terms. In rural areas loan amount starts from $250 in the first cycle and increases up to $800 in the next cycles. In urban areas loan amounts start from $1,000 and increases up to $5,000 in the next cycles. The interest rate for urban clients is 1.5% flat interest rate per month and the maturity is nine months. For rural clients, the maturity is also nine months and the interest rate is 1.5% flat interest rate per month for first, second, third and forth cycles while the maturity is 12 months for the third and fourth cycles. The general community reaction to the loan program was very positive.
Achievements: 1,210 households across six districts of NAR were reached via this program. Between 1999 and 2002, following amounts of funds were dispersed:
1999 – 724 loans - $244,400
41 IOM is also working with rural communities to rehabilitate a network of ancient underground water canals, locally known as "chaheriz". These man-made canals used to collect water and bring it to the surface for household and irrigation use. "Chaheriz" were widely used in Nakhichevan and in many Middle Eastern and Central Asian countries, but the introduction of modern piped water systems made them redundant and dilapidated. At the request of local communities which lacked reliable water, IOM staff examined historical documents in local archives; inspected hundreds of old abandoned wells and explored many kilometres of underground tunnels. IOM also trained individuals in ancient construction skills, locally known as 'Kankan". These skills were usually passed on from one generation to the next, but much of the knowledge had disappeared. IOM managed to locate two elderly men with the ancient Kankan skills and organized training for ten young villagers. These villagers recently excavated their first chaheriz in the city of Nakhichevan. The tunnel, close to one mile or 1.3 km long, was buried at a depth of some two metres. The rehabilitation work was done by hand.
148 149
2000 – 1,115 loans – $542,600 2001 – 615 loans - $343,000 2002 – 200 loans - $89,000
In rural areas the loans are given primarily to agriculture and animal husbandry, whereas in urban areas the emphasis is on production, service and trade sectors. In rural areas, 62% of the total loans dispersed were used for animal husbandry, 23% for agriculture, 11% for trade, and the rest for purchase of agricultural equipment, poultry, bee-keeping. In urban areas, 35% of the loans were utilized for production, 28% for service, 22% for trade and 15% for farming.
The project supported the local community in rehabilitating 22 water systems. In addition, the Chaheriz sytem renovation project which was mainly funded by EU was started by training local youth interested in participating in the project and by getting in touch with the local university.
A women producers and marketing co-operatives project was funded by the Netherlands. During May 2000, 13 women from Babek region were organized into producers and marketers of yogurt and local bread. These members are trained on basic principles of management, product development, branding, packaging, marketing and quality assurance.
Possible Improvements in Community/Individual Programs. The experience in NAR so far suggests there is demand for larger loans (US$ 10,000 - 50,000). Potential sectors for investments are agriculture and production. An initial program of US$ 5 million would be justified initially. The current repayment rate for the IOM project of 98% is further evidence that a more ambitious loan program is justified and can be sustained, especially if it is targeted at the community level.
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Other Donor Activities in NAR
In addition to activities already mentioned, a number of other donor supported activities have been undertaken in NAR as the table below illustrates. Table 32
Program Sector Description Program Beneficiary Group # of Beneficiaries Location Donor Title (Shelter, Duration Food, (start- Education, finish) Income Generation, etc.)
Food Security Food Direct Food 230,105 Naxcivan United States 8/99-7/00 1. IDPs & Refugees; Distribution AR: Department of Babek, Julfa, Agriculture 2. Female Headed Ordubad, (USDA) Households/ Shahbuz, Pregnant lactating Sharur, single mothers; Sadarak, 3. Pensioners living Naxcivan city. along (65+); North-west: Ganja, 4. Severely Goranboy, Handicapped; Naftalan, Sammux, 5. Large families (4+ Khanlar. children under age South: of 18); Imishli, Saatli, Beylagan, Agjabadi, 6. Special cases. Agdam, Sabirabad.
Primary Health Distribution of 5/00- Entire conflict affected 347,000 All Naxcivan USAID Health Care medicines and 09/02 population of NAR AR professional consultations Family Income Distribution of 1/00- IDPs & Refugees 77,337 Ganja, UNHCR Garden Generation greenhouse kits, 12/00 Khanlar, Project tools and other Shemkir, inputs. Goranboy, Distribution of Sammux, seeds and tree Naftalan, saplings. Terter. Naxcivan Income Disbursement of 2/99- ADRA is using Category I, 1,825 Babek, Julfa, USAID Agriculture Generation loans 10/00 II & III Support Loans Naxcivan city, Micro defined by the area of Ordubad, Enterprise application. Shahbuz, Category I - Agriculture Sharur. Support Loans; Category II - Animal Husbandry Support Loans; Category III - Trade Support Loans. Health Health Seminars, 11/98- IDPs & Refugees; 3,000 Ganja region ADRA Promotion trainings to 6/00 Vulnerables.
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promote healthy living style
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