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HOW DID THE GOVERNMENT UNDERSTAND?
James Hakobyan
Lragir, Armenia
Dec 25 2006
The intention of the government to revise the procedure of subsidizing
gas for the industries could be considered as reasonable if the
subsidy were not such an unreasonable step. Like the prime minister
said several days ago, they thought the subsidy would help to keep
the prices of products low, but the prices soared, nevertheless,
and it aroused questions with the government. Now the government is
likely to discuss whether the subsidy is expedient.
This could be considered progress of the government towards economic
thinking. In reality, however, this phenomenon reveals once again how
void this thinking is. After seeing the consequence of this thinking
only a hopeless fool would not realize that it is a mistake and would
not try to correct his mistake. Meanwhile, the problem is to think
enough before making a mistake to avoid it. And not everyone is able.
The government gives a subsidy of several million dollars to such
industrial giants of Armenia like the cement factories of Ararat and
Hrazdan and then suddenly finds out that it was a mistake, and the
price of the cement nevertheless soars. The impression is that the
government listens to its inner voice and then finds out its mistake.
Meanwhile, the government should first study every branch of the
economy before granting subsidies. The tendencies of development,
the correlation of the supply and demand, the regional developments
should be evaluated first because the factories of cement, for
instance, sell the bulk of their production abroad. In that case
the government would see that in the economy nothing is absolute,
and subsidy should not be based on the same measurement.
There is another explanation of subsidizing which is as absurd. The
government said that it would help the Armenian producers become
competitive compared with the producers of Georgia and Azerbaijan
who have to pay more for gas, and for the Armenian producers the
price remained the same or increased. For a term of three years it
is possible, but the price of the Russian gas will cost 110 dollars
for this period, and the government decided to subsidize gas for this
period. But this resembles a situation when a doctor gives a painkiller
to the patient instead of a treatment. Meanwhile, the other patients
are taking a treatment, and the government is not interested in what
will happen later when the others recover, for it is only solving a
current problem. But if they have decided to reconsider the subsidy,
something must be happening. Maybe the reason was the appeal of the
IMF resident representative for Armenia Nienke Oomes who advised to
reconsider the subsidy because it is not effective. Considering the
"deep respect" of the Armenian government for female representatives
of the international organization, the government may have listened
to the appeal of the IMF representative.
But the problem is what the government understood from this appeal.
It is possible that the current size of the subsidy is not effective
because it is small and needs to be boosted.
James Hakobyan
Lragir, Armenia
Dec 25 2006
The intention of the government to revise the procedure of subsidizing
gas for the industries could be considered as reasonable if the
subsidy were not such an unreasonable step. Like the prime minister
said several days ago, they thought the subsidy would help to keep
the prices of products low, but the prices soared, nevertheless,
and it aroused questions with the government. Now the government is
likely to discuss whether the subsidy is expedient.
This could be considered progress of the government towards economic
thinking. In reality, however, this phenomenon reveals once again how
void this thinking is. After seeing the consequence of this thinking
only a hopeless fool would not realize that it is a mistake and would
not try to correct his mistake. Meanwhile, the problem is to think
enough before making a mistake to avoid it. And not everyone is able.
The government gives a subsidy of several million dollars to such
industrial giants of Armenia like the cement factories of Ararat and
Hrazdan and then suddenly finds out that it was a mistake, and the
price of the cement nevertheless soars. The impression is that the
government listens to its inner voice and then finds out its mistake.
Meanwhile, the government should first study every branch of the
economy before granting subsidies. The tendencies of development,
the correlation of the supply and demand, the regional developments
should be evaluated first because the factories of cement, for
instance, sell the bulk of their production abroad. In that case
the government would see that in the economy nothing is absolute,
and subsidy should not be based on the same measurement.
There is another explanation of subsidizing which is as absurd. The
government said that it would help the Armenian producers become
competitive compared with the producers of Georgia and Azerbaijan
who have to pay more for gas, and for the Armenian producers the
price remained the same or increased. For a term of three years it
is possible, but the price of the Russian gas will cost 110 dollars
for this period, and the government decided to subsidize gas for this
period. But this resembles a situation when a doctor gives a painkiller
to the patient instead of a treatment. Meanwhile, the other patients
are taking a treatment, and the government is not interested in what
will happen later when the others recover, for it is only solving a
current problem. But if they have decided to reconsider the subsidy,
something must be happening. Maybe the reason was the appeal of the
IMF resident representative for Armenia Nienke Oomes who advised to
reconsider the subsidy because it is not effective. Considering the
"deep respect" of the Armenian government for female representatives
of the international organization, the government may have listened
to the appeal of the IMF representative.
But the problem is what the government understood from this appeal.
It is possible that the current size of the subsidy is not effective
because it is small and needs to be boosted.