Capital expenditures of Amulsar Project’s construction phase to be completed this year will total about 370 million USD, which is the largest international investment in Armenia. Lydian Armenia is already ranked the 19th in the list of the country’s largest taxpayers, which speaks of significant economic effect of Amulsar Project’s construction. There is more to come with the operations phase. What have these investments brought to Amulsar adjacent communities? We have talked about this and other issues with Nara Ghazaryan, Social Sustainability Manager at Lydian Armenia.
– Lydian Armenia became a large taxpayer in 2017. Company says it will be paying 40-50 million USD taxes per year when production starts. What will the communities gain from this?
– I think it is not quite correct to assess investments in terms of taxes only. Of course, taxes are important, but it is not the only important indicator of economic impact. The number of jobs created due to these investments, indirect jobs, economic impact caused by these investments are important as well. In this sense, mining is perhaps one of the sectors with major impact on economy.
Here are some examples: more than 1,400 people were hired in the Project construction activities last year, 40% of which from local communities. More than 700 people will have permanent jobs during the operations phase. Every direct job in mining generates 5-6 indirect jobs. Namely, small businesses are set up to provide services to the mine, such as supply of food, goods & services: cleaning, transportation, maintenance and other services. Last year, local procurement by Lydian contractors from adjacent communities (goods and services) was a serious economic indicator as well. For instance, in November, local procurement totaled more than 326,000 USD. Both local jobs and procurement have already had a tangible impact on economies of the local communities.
– Lydian Armenia implements social programs in addition to direct economic investments. What is the goal of your programs?
– Lydian Armenia has invested about 3.4 million USD in social development or livelihood programs in Jermuk, Kechut, Gndevaz, Saravan, Gorayk communities during all these years. Although there are many issues in communities, especially in villages, quite big number of those issues have been resolved step-by-step over time. Compared to previous years, there is tangible progress in these communities, resulting from not only construction activities at Amulsar and business activities in local communities, mentioned earlier, but also livelihood & development programs supported by Lydian.
For instance, last year alone (2017), 31 new business plans have been approved and these businesses gradually start operating. Positive impact of these businesses will hardly remain unnoticed in the communities, I think. With the same initiative, Lydian supported additional 24 small businesses last year and they keep developing.
– It is widely perceived that Lydian is supporting these programs as charity to favor the local communities.
– We are neither charity nor government. We have specific reasons to finance community investment programs, and charity is not within our goals or functions. Here are the reasons of our community investment. First, what we do is called “mitigation or minimization.” For instance, if we have bought land from Gndevaz for implementation of Amulsar Project, we believe that the land owner has lost his livelihood source/land, despite generous compensation by the Company. In such situation, we are committed to promote additional or alternative livelihood opportunities for them. This is required by the international standards we have adopted.
Second, it is in Project interest to be surrounded by dynamically developing communities that often turn into efficient partners. We seek cooperation with our communities, we want to be good partners and hire people from these communities, and procure locally. The more social and economic progress these communities have, the more efficient our cooperation will be.
– How do you choose sectors for cooperation? How do you identify the real needs of local communities?
-So far, we have been working in various fields that were chosen after serious studies, needs assessment surveys and analyses. The first thing we prioritize is development of village infrastructure. For instance, the irrigation canal in Gndevaz will irrigate 200 ha of land, which means that the amount we spent on upgrade is fully justified. The entire community will use the canal to irrigate agricultural lands that lacked irrigation water since the collapse of the Soviet Union. New orchards will be established as a source of income.
We prioritize educational programs, since the youth is our target group. We do our outmost to develop their abilities and skills. If young people have no education opportunities in their village due to lack of cultural and educational centers, the village is passive, people see no future for their children. So this capacity fades away. Such situation makes people leave their village to find a better place for education and future of their children.
To boost economic diversity, we contribute to the establishment and development of small businesses, help farms get excess yield through new technologies and technical assistance. We support the development of agriculture and animal husbandry, introduce new plants. Such programs aim to maintain traditional livelihoods, develop them through new technologies.
– How realistic is it to develop agriculture in areas adjacent to mine project?
– International experience shows that it is realistic and quite efficient. It is an Armenian stereotype that no other sector of economy can develop in proximity to a mine. There are hundreds of examples in the world showing that mining works as a driving force for development of agriculture and other sectors. Let’s admit that all innovations in this region, including in the agriculture sector, would hardly be possible without Lydian’s community investment programs. It is evident that the mine project has brought horticulture development opportunities to Amulsar adjacent communities.
– The issue is often raised around environmental impact. Is it really safe to develop agriculture in proximity of the mine?
– Certainly, it is quite realistic. Otherwise, my colleagues and I would not join Amulsar project. Nowadays, modern mines are operated in proximity to touristic cities, agricultural lands; and various sectors of economy contribute to each other. I can see the pretext of the question and I am absolutely sure that it is possible to have clean & safe water, soil and high-quality agriculture products near the mine. Unfortunately, all of us witnessed quite negative situations in Armenia before around the mine sector. In this sense, I understand people’s concerns and lack of confidence. However, I am sure that Amulsar will be a modern mine like those operating in the developed world and will not cause damage to agriculture. By the way, we regularly monitor samples of some agricultural products (honey, fruits etc.) to have facts and prove that high-quality fruits and vegetables can grow next to the mine and that their quality will not deteriorate because of the mine.
– Today, Lydian supports a wide variety of startups in local communities. However, Amulsar is a 10-year project and you will not stay here forever. When Company leaves, these villagers will be left alone with their businesses…
– Well, the enterprises and businesses that were supported by Lydian and some currently providing services to Amulsar project should develop on their own & operate independently after Lydian completes its activities. There is sufficient time for that and I am sure our technical trainings and capacity building will help them successfully run their businesses and be sustainable. We clearly state our message to them: and that is, do not see Lydian as your only or main business partner or consumer, expand your market and use our trainings to develop your businesses.
– There is almost no business culture in village communities. People have no experience in starting businesses and after all, it’s risky. Do people believe that they will achieve success?
Yes, they do. They understand that this requires serious work. They already know what it means to work with Lydian. It means business discipline, accurate estimates, accurate paperwork, compliance with laws, observation of health and safety standards, etc. Even small-scale construction activities carried out in communities cannot be implemented by traditional methods. Any activity shall meet all construction and safety standards. Initially, much of this was either unclear or unacceptable to community members. Many tried and still try to work using old methods, but many realize that working with such Company means working at higher standards. For the local culture, this is also a novelty and a change that comes to rural areas with a foreign company and becomes workstyle and lifestyle. I can state for sure that many local businesses supported by Lydian, start looking like Western style companies.
Nevertheless, this requires continuous efforts and monitoring. The partners that are not ready to exert genuine efforts and work on themselves, learn & comply with our standards, cannot cooperate with us, let alone ensure sustainable development of their businesses. Our experts introduce these standards in Amulsar adjacent communities with patience. Even if the results of their efforts are not visible now, they cannot but become evident and tangible over time.