Armenia: Waiting for second-generation reforms

Author: Susanna Petrosyan, Yerevan, exclusively to VK

The presidential elections in Armenia were held more than three months ago, but the situations in the economy and the social sphere are still a matter of great concern. In May alone, huge crop losses in some areas took place due to heavy hail, and in mid-May dairy products became more expensive by 8-10%.

Companies that produce dairy products explain this rise is due to the increase in purchase prices for milk and imported raw materials. The State Commission for the Protection of Economic Competition began studying the market for dairy products and requested the Ministry of Agriculture of Armenia to provide information on the dynamics of the purchase prices for milk. But history shows that if prices for something rise in Armenia, despite all the assurances and discussions, the prices will not drop.

At the end of last year, Armenia's foreign debt stood at 1.508 trillion drams or $ 3.738 billion. In January-May, the inflation rate rose to 3%. The main catalyst for the acceleration of inflation was the group of food products, for which the average prices this year rose incrementally from 101.6% in January to 104.2% in April. Similarly, prices for clothing and footwear also increased; prices for essential commodities rose significantly. According to the National Statistical Service, consumer prices in April rose by 3.9% compared to the same period last year. Expected increases in tariffs for gas and electricity will also significantly complicate the situation of citizens in the summer.

According to the chairman of the Union of Employers, Gagik Makaryan, the country is still not creating conditions for the development of small and medium-sized businesses, and many small businesses today, after years of work, can only be closed, because of the reduction in the number of consumers, the cause of which, in turn, was the decrease in living standards and the increase in the number of poor.

Today, many experts see a way out of the situation in the reform of the second generation. The need for reform was pointed out by the representatives of the International Monetary Fund. After the election of the Council of Elders of Yerevan, the head of the Armenian IMF mission, Mark Horton, and IMF Resident Representative in Armenia, Guillermo Tolosa, in a joint statement called on the authorities to implement decisive and radical reform. According to representatives of the IMF, there is a need for further measures to stimulate private investment, create a level playing field for all market investors, improving tax collection, etc.

The first phase of reforms in Armenia began in the early 90s and has been held back by the government of Grant Bagratyan. The reforms demanded their logical continuation, but the transformation process stalled in 1999. According to the vice-rector of the Russian-Armenian University, Professor Edward Sandoyan, today Armenia is in a situation where its economy is very difficult to be described as “free market”: the Armenian economy has characteristics which formally belong to a market economy, but in content they are far from that, "We have high levels of corruption and low competitiveness of the economy as compared to our peers. The country is inefficiently promoting an export-oriented economy, and this is the only direction for our future development,” the scientist and economist says, who believes that the country has institutions that protect property rights at a rudimentary level, and there is still no effective legislation, administration or judiciary.

What kind of philosophy is guiding the Armenian government today? The most striking indication of its ideology are the statements made by various members of the ruling Republican Party of Armenia (RPA), that only in the ranks of political power are there the most professional and competent staff. In this regard, the statement by one of the leading ideologues of the Republican Party, vice-chairman of the party Galust Sahakyan, that the Republican Party is going to be in power as long as there is a danger of war, is even more surprising for its candor.

Judging by the current trends of the settlement of the Nagorno-Karabakh conflict, the period when the Republican Party will be in power will last a long time. And when we consider the role and place of Sahakyan in the hierarchy of the ruling party, it is possible to make an unambiguous conclusion about the serious intention of the continuation of essentially one-party rule and holding further monopoly of power by the Republican Party.

In the economic sphere, the monopoly of power of the RPA is expressed in the rule of the clan-oligarchic system, which ensures the development of large monopolies at the expense of small and medium-sized businesses. However, these political and economic realities leave an imprint on the appropriate social services. The situation is characterized by the further impoverishment of the people, the further loss of economic independence by the vast majority of them, which in turn greatly facilitates the manipulation of these segments of the population by the authorities, whose main task is to maintain at all costs the monopoly on power and to ensure its reproduction. The existing system is a reality. While this scheme works, all statements about the need for a second phase of reforms will remain empty promises, regardless of who makes these statements.