In conversation with Nazareth Seferian, Tigran Jrbashyan, Partner and Director of Management Advisory Services at Ameria CJSC and one of the country’s leading economic visionaries, reveals how Armenia can leverage circular economy principles not just for environmental benefits, but as a strategic pathway to economic transformation.
Interview : Nazareth Seferian
Photo : Ameria CJSC
As someone with extensive experience in economic development, how would you define the Circular Economy in practical terms?
— If we try to present some things as basic concepts, then here’s a simple representation of what we get through “industry”—a raw material is extracted, processed, and then sold to consumers, who use it and eventually discard some or all of it. There is waste at every stage of this process, not just the end. This is what we call a linear approach. Circular Economy is a concept through which the waste at each stage is reduced or eliminated, returning it into the production cycle and allowing the development of new products and services, reused or recycled solutions.
This is not completely new to the Armenian context. Over the years, I have had the opportunity to visit many textile factories in our country, and I’ve seen how some companies have modified their processes when it comes to cutting fabric to reduce losses or reusing the waste pieces to make new products. These companies may not have heard the term Circular Economy, but they are taking their value chains to greater circularity, simply because it makes business sense for them to do so.
The different trends I see internationally can be understood in the context of Maslow’s pyramid, or the hierarchy of needs. In developed economies, they are higher up that pyramid, and so the Circular Economy is all about responsibility, a kind of “self-actualization” where the key message is to save the planet. In countries like ours, we are not up there, but a transition to the Circular Economy actually makes sense for all kinds of other reasons.
So, what would you consider the compelling arguments for a transition to the Circular Economy in Armenia?
— I can think of half a dozen key arguments to make here. First, we have serious limitations when it comes to accessing trade routes. We have no direct access to the sea, and two of our four land borders are closed.
Any raw material that comes into Armenia will come at a higher price for us than many of our neighbors. So we should use this raw material to its absolute maximum, creating as much new value from it as possible and reducing waste to zero, if possible.
This will raise Armenia’s overall competitiveness. Second, our economy is structured such that a considerable part of it consists of the extractive industries. If we add agriculture to this mix, as a kind of economic activity that once again extracts resources directly from nature, their combined share in the economy is massive.
Circular Economy principles mean using these extracted resources more efficiently, and that will have a direct positive impact on economic productivity in Armenia. The third argument comes in the form of innovation. Very often, a transition to the Circular Economy comes with new technological and innovative solutions that can qualitatively change our economy and lay a strong foundation for future growth. Fourth, Circular Economy solutions tend to be very inclusive. The experience of other countries suggests that the transition to circularity comes with a combination of more blue-collar jobs for tasks like waste sorting as well as high-end white-collar jobs in engineering, and everything in between.
Given the inefficient use of labor resources in Armenia today, a move toward the Circular Economy can help us provide good jobs to our population while also attracting talent from abroad. Fifth, circular solutions tend to be geographically dispersed. Given that they often focus on sectors like mining, agriculture, tourism, and so on, there is a lot of activity today outside Armenia’s capital, and these regions can become tomorrow’s hotbed of circularity. The GDP per capita in Yerevan today is three to four times higher than in the regions, so any increase in economic activity in the regions would have a massive positive effect in closing that gap. And finally, we have the positive environmental impact that comes with the Circular Economy, which will make Armenia and our planet a cleaner, healthier, safer place to live for future generations. As I said, in developed countries, this final argument is the driving force. But I see it as a smaller part in a much bigger, strategic vision for the Circular Economy in Armenia. And this now serves as the shared vision for the Armenian Circular Economy Coalition.
Which countries or regions do you consider leaders in implementing Circular Economy principles, and what specific lessons could Armenia learn from them?
— The first countries that come to mind are in Northern and Western Europe—the Scandinavian countries, the Netherlands, Germany, and the United Kingdom. They have many solutions that we can learn from and adapt to our context in Armenia. But, once again, it is important to understand that the motivating factors behind development are different in those countries.
Let’s take, for example, the manufacture of biogas from domestic waste, a common practice in some countries like Denmark. They are driven to implement this to reduce environmental risk. In our case, the driving factor will be energy independence, reduced energy costs, or increased efficiency when it comes to producing biofertilizer. We must focus on development directions when it comes to circular solutions, otherwise, we risk being unable to make the most of the opportunity.
This is a very strategic approach to the Circular Economy. Would you say that the public sector is a key player when it comes to making this a reality in Armenia?
— This is indeed strategic, and the public sector is very important. But let me be clear in saying that I hope we do not have a separate strategy for the Circular Economy in our country. We can have separate strategies for things like forest management or water resources, for example. But the Circular Economy needs to be a horizontal effort—it should be integrated into existing and future strategies in all sectors. This also means that circularity should not be housed within a single ministry like the Ministry of Economy. It should be a part of the agenda for other ministries as well. The efficient and effective use of our resources should be a recurring theme in all areas of state policymaking. In our case, the Circular Economy is a means, not an end.
As a simple first step, the state can intervene to encourage the private sector to reduce and reuse waste. There is no need to reinvent the wheel. Policymakers should look at what is already happening in the country and gently nudge businesses in the right direction.
Let me give you an example from another textile factory I visited. This is a factory that exports everything it produces to the West. When I visited them, I saw a very specialized and sophisticated piece of equipment for washing the fabric, while all the other factories I had seen tended to use simpler, cheaper machines that could serve several purposes at once. I was impressed by what I learned. After each wash cycle, that sophisticated device sent data to its manufacturer in Italy, which then generated a document that certified that batch of fabric as being low-water intensive. This was the product’s added value that allowed it to have a market in the West and charge a premium.
So, circularity makes business sense at the company level and is of strategic importance for Armenia at the national level. I see it as an engine that can take us to economic growth and sustainable development. The state can choose to fine businesses or reward circular solutions. For example, each company could pay a certain fine for discarding its waste. But this is difficult to implement and monitor. Instead, the state could set up a mechanism where the delivery of that waste to another company with a circular solution is rewarded. This would automatically give businesses a financial incentive that would increase their circularity, and it would create new industries to power the Circular Economy in Armenia.
You and the rest of the ACEC Coalition are part of the CirculUP! Project led by Impact Hub Yerevan. What are your views on the project, and what more needs to be done to promote the Circular Economy in Armenia?
— CirculUP! is an important project and lays solid groundwork for the development of the Circular Economy in Armenia. For future initiatives, we should focus on technology transfer and capacity building. There is a lot of potential in Armenia for energy efficiency or reducing losses that can be achieved through relatively simple technologies, like the example with the low-water-intensive fabrics I mentioned earlier.
If future initiatives talk to businesses and present these opportunities to them while also connecting them with partners who can help bring this technology to their companies, this will be a big step forward.
Innovation comes after an initial stage of modernization, and we have not yet used up the full potential of that stage, so we cannot leapfrog into innovative ideas just yet.
It’s one thing to train startups and small businesses on the concepts of Circular Economy—this is very important, no doubt. The next logical step is to make real connections by taking these companies to expos where they can see circular solutions in action, and help them strike partnership deals with the companies that deliver these solutions.
What about consumers? What is the solution to the “chicken-and-egg” puzzle in this case? Do responsible consumers create circular businesses through demand, or do circular businesses educate consumers to be more responsible?
— I can say for myself that I pay attention to waste and other principles of circularity, even when it costs me a little more. But I am part of a very small minority in our country. I think we need to think long-term when it comes to consumer behavior; this will come later in the process through education and increased awareness. In the short-to-medium term, things need to be practical and convenient for consumers; otherwise, their behavior will not change. For example, you have the option of getting a paper bag or a plastic one at the supermarket. As long as the paper bag costs two or three times more than the plastic option, very few shoppers would go for paper. If, through some kind of state policy, they become equal in price, or paper becomes cheaper, it might work. But we have issues, in general, when it comes to the execution and monitoring of our laws. So I would prefer to focus on consumer education and see a long-term change through increased awareness.
What about the role of Armenian banks and financial institutions in financing circular economy projects?
— There is a lot of food for thought when it comes to banks. Financial institutions have a longer-term planning horizon than most businesses in Armenia; this is natural. And there is definitely a role they can play. Let me give the example of small hydroelectric stations in Armenia. When it comes to constructing these stations, there are several options for the turbine systems—European technology, Russian versions, and homemade Armenian options. Many small hydroelectric stations in Armenia were made using the local technology over the past two decades, and banks readily financed these solutions, but they ended up having a shorter lifespan.
The European turbines are more durable and would still have been operational on those same stations, had they been installed instead. Banks could, for example, say that lower-quality technology is riskier and the financing comes with higher interest rates in such cases, which would encourage businesses to go for newer technology, and thus contribute to circularity.
In general, I remain quite optimistic about the future of the Circular Economy in Armenia. It would be wonderful for its strategic potential to be recognized and for the public sector to take an active role. But, even with just the private sector engaged, there is a lot of potential to take Armenia’s economic development to the next level through circular practices.
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