The economic feasibility of cotton cultivation in Armenia

¹ The Institute of Economics after M. Kotanyan of the National Academy of Sciences of the Republic of Armenia, 15 Grigor Lusavorich Str., Yerevan 0015, Armenia
² Yerevan Branch of Plekhanov Russian University of Economics, 0038 Yerevan, Armenia
³ Brusov State University, 0002 Yerevan, Armenia

^* Corresponding author: This email address is being protected from spambots. You need JavaScript enabled to view it.

Abstract

The fragmentation of agricultural and industrial value chains represents a critical challenge for sustainable bio-based economic development in transition economies. Armenia provides a distinctive case where domestic textile manufacturing relies heavily on imported raw cotton fiber, while domestic cotton cultivation remains virtually absent from agricultural production. This study assesses the economic feasibility of reintroducing cotton cultivation in Armenia by integrating trade dependency analysis with a Net Present Value (NPV)–based investment appraisal framework.The analysis is based on national trade and agricultural statistics, as well as empirical cost and revenue data derived from pilot cotton cultivation initiatives. A representative investment scenario covering 550 hectares of irrigated land is evaluated over a 10-year time horizon using discount rates of 1%, 5%, and 8%. Sensitivity analysis is applied to examine the effects of yield variability and price fluctuations on project profitability.The results indicate that domestic cotton cultivation can generate positive net present value across all financing scenarios, with NPV ranging from 829.7 to 1,352.4 million AMD. Although profitability is sensitive to yield and market conditions, the investment remains economically viable under moderate adverse scenarios. The findings suggest that reintroducing cotton cultivation could enhance the resilience of Armenia’s bio-based fiber value chain, reduce import dependency, and support rural economic development. The study provides policy-relevant insights for small transition economies seeking to strengthen agro-industrial integration through economically grounded interventions.