Armenia Tries to Adopt EU Standards to Break Into EU Market By Suren Deheryan According to Marina Harutyunyan, a representative of a company exporting natural juices from Armenia to the EU countries, they export to Europe more for the sake of bolstering the company image rather than for gaining profit. ''A company exporting to the EU gains a reputation in other international markets, which increases export volumes'', says Marina Harutyunyan, who heads the Export and Import Department at SIS Natural. The company has eight years of export experience to foreign markets. However, it is only since last year that it has entered the EU market. At present, the export volume to the EU comprises 40 tons or about 5% of SIS Natural’s total annual export volume. ''Based on our strategy, we have to conquer the EU market step-by-step, as the European market is hard to penetrate, and the quality requirements are the toughest in the world'', says Ms. Harutyunyan. ''The right time had to come as well, as we realized that only unique production can attract European consumers.'' This 'unique production' happened to be pomegranate and sea-buckthorn juices produced from SIS Natural bio-products. They were followed by juices made out of locally grown apricots, peaches, tomatoes and rosehip, as well as Armenian fruit preserves from white cherries, nuts and rose petals. EU expert Aleksey Sekarev is convinced that Armenian products, such as juices and fruit preserves have higher demand in the EU market, however many producers cannot access that market, as the technical requirements in Armenia do not comply with the standards applied in the EU. To close this gap, Armenia needs to reform the quality infrastructure, and the Armenian-European Political and Legal Assistance Center (AEPLAC) headed by Mr. Sekarev advises the government in this regard. ''These reforms will open the doors for Armenian products to the EU markets, which are currently closed due to non-compliance with the EU standards. The reforms in quality infrastructure will ensure compliance with the EU standards and foster increased export from Armenia to the EU,'' clarifies Mr. Sekarev. EU has already become a major trade partner for the Armenia in terms of export. According to the data from the Armenian National Statistical Service, 54% of Armenian export or production worth of about USD 198 million was exported to the EU countries from January – May, 2010. EU countries comprised 45% of the total export in 2009 and 56% in 2008. However, natural resources, such as non-precious metals (for instance, they made up 53% of the total export volume in 2008), mining production (20%), diamond and other precious stones (15%), etc., have always prevailed in the Armenia-EU export variety. Specialists claim that due to low diversity,   Armenian exports become vulnerable at   times of instability in  the global market. As proof, they indicate the decline in the export of mining production in the last two years. To ensure an across the board competitiveness in the international and particularly in the EU market, the Armenian Ministry of Economy has developed a paper called Draft Strategy for the Reform of the Republic of Armenia's Quality Infrastructure (2010-2020) (the English and Armenian texts can be accessed from http://www.mineconomy.am/am/72/item/1304/). It is currently in the phase of public discussion and will be submitted for the approval of the Armenian government in the autumn. As per this document, it is planned to restructure the institutions for standardization, metrology and licensing in Armenia by 2012, to ensure institutional development and capacity building in 2012-2016 and to receive international recognition of the developed capacity in 2016-2020. ''We certainly hope that the reforms will end earlier. However, since the planned activities are rather ambitious, the timeline is prepared with maximum deadlines. The results may be seen much sooner, as the legislative changes are planned to be implemented in the first two years,'' says Lili Maksudyan, who directs the Innovation, Standardization and Metrology Unit at the Ministry of Economy. The local specialists approve the draft strategy; however they believe that such reforms will require extensive financial investments and a political will to root out the existing low-quality system. According to Gagik Makaryan,   Executive Director of the Union of Manufacturers and Businesses of Armenia (UMBA), businessmen have long been waiting for such a strategy. '’Recent research indicates that Armenian businesses tend to lose their competitiveness in the international market. One of the reasons is the lack of a coordinated approach to this problem,'' says Mr. Makaryan. According to Mr. Makaryan, the testing laboratories and certification bodies in Armenia can be biased in issuing documents, which comply with international standards only on paper, whereas in reality they have other indicators in terms of product management or product quality. More precisely, it should be mentioned that the certificates issued by all the 67 laboratories and 17 certification bodies authorized for national certification by the Armenian Ministry of Economy fail to meet  EU requirements. The same also refers to the National Institute of Standards, which enjoys the reputation of being the largest certification agency in the country. For this reason, Armenian producers prefer to spend extra time and funds to ensure quality certification of their products through European certification organizations. One of the few exceptions is that it is now possible to acquire a certification for organic products in Armenia, which is provided by a private company EcoGlob LLC. This right was obtained by EcoGlob from a German certification company DAR in 2008 and American USDA Organic in 2009. Today, the certification company has established stable cooperation with about 50 local farmer enterprises and processing companies, which produce and export organic food products (i.e. without artificial pesticides and chemicals). It is mainly juices, puree and frozen fruits that are exported to the EU countries in small quantities. At present, Armenian herbal tea is in the process of organic certification. In the opinion of Nune Darbinyan, Director of EcoGlob, the development in the trade turnover between Armenia and the EU has been dynamic. And it is commendable that it is the Armenian businessmen that have initiated the export of Armenian production to the EU. The EU invests its own efforts to compliment those by the Armenian businessmen by creating additional privileges to enter the EU market. Those include GSP and GSP+ Standard or the Generalized System of Preferences, to which Armenia has been applying since January 1, 2009. Under the GSP Standard, about 6,400 products from 176 developing countries are licensed to enter the EU market with zero or considerably lower custom tax. Meanwhile, the GSP+ standard offers additional decrease in custom tax to support vulnerable developing countries in ratification and enforcement of international agreements in this area. Armenia is also included in the on-line information portal called Export HelpDesk developed by the EU in 2004 (www.expoerthelp.europa.eu), which aims at making the EU market accessible for exporters from developing countries. The website helps the businessmen to learn about the requirements set for a specific export product, applied custom taxes, to clarify the list of required documents for certification of origin, privileged regimes and to find useful links and partners. The Enterprise Europe Network (EEN) is yet another resource - one of the largest EU initiatives in supporting small and medium enterprises (SMEs) in Europe and beyond – may be of no less importance for Armenian businessmen (http://www.enterprise-europe-network.ec.europa.eu/index_en.htm). ''In the light of fierce international competition, EU companies always seek   new markets, regardless of their size,'' says the Head of AEPLAC. ''Armenia has a number of advantages as an economic partner – cheap and quality labour force, open economy, a set of exported products highly demanded in the EU. EU companies use the Armenian raw materials in their production to ensure low prices and increase in production volumes to the extent possible.'' Meanwhile, the EU expert stresses that business opportunities with Armenia are neutralized due to the corruption in the country and high transportation prices.