Armenia creates export-oriented economy

The ruling Republican party of Armenia presented a new economic development strategy on December,4. The strategy stipulates the creation of export-oriented industry in the republic. According to Armenian PM Tigran Sarkisyan, this document is one of the most important programs that will ensure the progressive development of the country and help create new traditions of equal interaction between the government and the public in the field of economy. The minister said fighting poverty was the main priority of the government as presently its indicator is to high – 30%, while the abject poverty indicator is 15%. According to Sarkisyan, the chief mistake of Armenian economical policy that led to this state of affair is a low level of attention towards micro-economic problems. The new strategy supported by the county’s Central Bank stipulates even development of macro- and micro-economy. Main export items listed in it are pharmaceuticals, brandy and products of high-tech engineering.

This new strategy was developed by the Armenian Economy Ministry with the help of the World Bank. In 2012 an Industry Council for the program’s realization will be created. It will comprise 11 sectoral associations. Several pilot programs have already been worked out: brandy, pharmaceuticals, high-tech engineering and bio-technology development. The total sum of expected investments to these fields is 25 million dollars, 15.9 million of which are to be allocated from the budget.

As Tigran Sarkisyan told VK correspondent, this export-oriented strategy of Armenian industry development will grant higher indicators of economic growth and the necessary level of diversification.

 However, the idea is not at all as new as the PM is trying to present it, and today, when the country is seized by pre-electoral fever, it is a good time to bring it up once again, even though nothing has been accomplished in this sphere since such a strategy of economic development was first offered 20 years ago. The government couldn’t reduce the abyss between export and import indicators (the latter being much higher) despite all its promises. Nothing could be done in 20 years, so the question whether such a program is realistic is quite reasonable.

Despite the cheering media reports, no progress in boosting the export has been achieved this year. Yes, in the period of January-September the rate of export growth was higher than that of import growth (139% and 111% respectively), however, in absolute figures the trade balance shifted not in Armenia’s favor: red ink indicator increased by 21.6 million dollars.

 Of course, the government and the Parliament understand that this negative trend has to be stopped, do the ruling party decided to try to boost micro-economy.

In first 8 month of 2011 Armenia’s state debt increased by 200 million dollars and reached 3.5 billion dollars. In the same time, the World Bank increased Armenia’s credibility rating by 6 points (however, it is still only 92nd of 142 countries). Low indicator as it is, Armenian government decided to use it to attract new investments.

Armenian experts don’t believe in the possibility of Sarkisyan program ‘s success, as business tycoons’ interests are still in priority. As the major corporations prevail on Armenian economic landscape, small enterprises have virtually no chances of success. According to the PM, the government adapted several laws to protect the interests of small business, for example, granted additional powers to the State Commission for economic competition protection.

However, this ‘additional powers’ have yet resulted only in 86 resolutions. On the other hand, the Commissions’ penalty activities resulted in additional 600,000 dollars for the budget. It is interesting to point out that the Commission seems to be generally uninterested in its main field of expertise as stipulated by its name – the study of monopolies’ interference with the free market. And the 600,000 penalty from the richest companies of Armenia collected in 11 month doesn’t seem impressive at all, and raises a question whether the commission is actually fighting monopolies or not. In these conditions it seems unlikely that the government will be able to create favorable conditions for smaller business development.

In fact, the government is more inclined to support the interests of importing monopolies, and the stable dollar exchange rate is a proof to that. Current rate is 380 drams (Armenian currency) for 1 dollar, but it is no secret that the government is planning a new year’s уму surprise – increase of dram’s value up to 360 for a dollar. However, only large importers would actually benefit from this ‘Christmas miracle’, while common people’s incomes will actually suffer.

In theory, Armenian liberal legislation should have prevented such a thing from happening, but the law enacting system of Armenia is not efficient enough to combat oligarchs’ interests. The government simply can’t allow itself to risk exercising any actual pressure on importer monopolists. Armenian oligarchs receive super-profits and manage to avoid super-taxes. The problem is obvious and spoken out loud – be everyone except the governmental officials.

 For example, according to customs declarations, imported sugar costs 184 drams per kilo when it crosses the border, but it is being sold in Armenian stores for 390 drams per kilo. The list of similar examples is far too long to cite here.

However, the State Commission for economic competition protection invested with ‘additional powers’ seems to have overlooked all these figures. On the other hand, monopolies practically own the market, so there’s no one left to protect. It is very interesting how the government is planning to replace import is these conditions. It seems that, as always, the promised measures will go only half-way without touching the interests of import monopolists.

By David Stepanyan. Exclusively to VK