U.S. FIRM TO HELP FOOD PRODUCTION INDUSTRY REBUILD

JAMES TENSER

BAY SHORE, N.Y. -- A group of American businessmen here have cut a deal with the government of Armenia to begin to rebuild that nation's battered food production industry.

P&E Food Production Technology Management and Armenia's Ministry of Agriculture have signed a $160 million joint-venture agreement that both parties hope will result in the re-establishment of food processing plants, support businesses such as farm and manufacturing equipment, and an improved distribution system that will provide reliable markets for the nation's agriculture.

The venture is designed to attract foreign capital and food production know-how, said Armand Ensanian, vice president of P&E, a business formed mostly by Armenian-American businessmen here.

Two initial projects planned for 1995 will be a tomato processing facility that will produce

paste and canned tomatoes, and a facility for producing fruit juice concentrates. Both products will be packaged aseptically in bulk for sale to Western markets for further processing into food products.

This month P&E will take a feasibility study team over to Armenia to begin looking at the nation's existing physical plants. The team will consist of a group of businessmen and investors from the food-service and manufacturing industries, he said.

"These are relatively smaller scale projects, ranging anywhere from $3 million to $5 million in scope," Ensanian said. "But they will allow development of basic businesses there."

Armenia's agricultural economy is still reeling from two blows: The first was the breakup of the Soviet Union, which cut it off from a guaranteed market for commodities such as beet sugar and forced the country, like others in the Soviet sphere, to confront market realities instead of centralized planning.

"The country was suddenly thrown into a market environment without skill to implement it," said Ensanian.

The coup de grace was a major earthquake in 1988, which destroyed the only sugar factory in Armenia along with more than 30% of the nation's manufacturing capability. In the intervening time, there has not been a domestic source of sugar for food processing.

"The Armenian government regards this as one of the basic development issues that must be addressed to move forward," said Van Z. Krikorian, an attorney at Patterson, Beklnap, Webb & Tyler, a New York-based law firm that helped negotiate the deal. Krikorian, also an Armenian-American, said the Armenian government intended to privatize its interests at some future time.

Ensanian said P&E would manage the initial businesses by following the models of successful American agricultural cooperatives. "If the farmer is working closely with the food processor, they can coexist toward same objective. They can obtain provide technical support on farming, share equipment and work to create a ready market for their products."

Ensanian said the construction of a new beet sugar plant is years away. "Based on the current economic plan, we anticipate that year 2000 will be the first harvest of sugar beets in Armenia."

He said the Armenians hope to attract investments from more Western food processing businesses for future projects.

Ensanian said the ethnic connection between the two parties has been crucial to establishing an understanding. "We have representatives in Armenia which are related to some of our executives," he said. "The trust factor is critical."

The joint venture makes P&E the majority shareholder. Ancillary businesses will be privatized Armenian companies. The sugar factory will require countless support industries within Armenia, including trucking and farm equipment, he said.