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The economy must be economical
by David Stepanyan
arminfo
Tuesday, November 22, 19:57
`The economy must be economical.' That's what Leonid Brezhnev, the
Soviet General Secretary of the 1970s-1980s, used to say, and that's
what best fits the Armenian economy.
Besides being economical an open economy must be competitive,
export-oriented and liberal. So, in order to understand why our
economy is not, mildly speaking, so well, we should analyze those
three qualities.
In the last year's global competitiveness index Armenia was just the
92nd among 142 countries but that was 6 positions higher than in 2009.
Inspired by that `achievement' our Government pledged to make their
economy more open but our monopolists will hardly allow Tigran
Sargsyan's Cabinet to do it.
The Forbes' report ranking Armenia as the second worst economy in the
world was a big shock for our authorities and spurred them to do
something to make their economy more competitive. According to Premier
Sargsyan, the key to economic growth is fair competition. And so, he
launched a series of measures to improve the economic legislation and
to boost competition in the country
Given enlarged powers, the State Commission on Protection of Economic
Competition started active measures against unconscientious
businessmen and has transferred to the budget as much as 230mln AMD
($600,000) as a result. Despite such impressive performance, the
Commission is not going to do what it is supposed to, i.e. to fight
monopolies. And so, its activities are just an imitation. $600,000 is
good only if compared with what the Commission collected before but is
nothing as compared with the fines stipulated by the law on economic
competition (from $13,000 to $500,000 per entity). One can hardly
build a competitive economy under such conditions.
Now that the ruling Republican Party of Armenia is preparing for
parliamentary elections it keeps promising to enlarge the exports by
starting to produce import substitutes. This is not a new promise
though. We have been given such promises for over 20 years already and
have seen nothing done to this end this year.
Even though in Jan-Sept 2011 the exports grew more quickly than the
imports (139% against 111%) the negative balance grew from $2bln to
$2.021bln. The current 380 AMD USD rate can hardly stimulate the
export and the traditional pre-New Year AMD appreciation (to 350 AMD)
is meant for the monopolists only and will hardly benefit ordinary
people, who are heavily dependent on USD transfers from abroad.
Though sounding more like a legend the rumors about the super-profits
of the Armenian oligarchs take quite a real shape in the customs
statistics. For example, the customs price of one kilogram of sugar
imported into Armenia by a monopolist is 184 AMD while the commercial
price in the stores owned by the same monopolist it is 390 AMD, i.e.
twice as much. The Commission should have done something about it but
the point is that it has nothing to protect on the monopolistic sugar
market. The same is for the vegetable oil market, where the customs
price is 410 AMD while the market price - 930 AMD per liter. In such a
situation one can hardly orient the market towards export and
substitute import. Or can one? You better ask this question to the
authorities and their monopolist friends.
As regards Armenia's much-vaunted liberal economic legislation, we
must admit that de jure it is not worse than the laws applied in the
most developed countries but de facto it is not effective.
Sept 29 the Armenian Government adopted a draft national budget 2012
stipulating reduction in the budget deficit due to a raise in tax
revenues (from 101bln AMD to 874bln AMD). According to experts, 30-50%
of the Armenian economy is in shadow, so, the Armenian authorities
seem to have a reserve for doing this but in reality everybody knows
that the raise will be ensured at the expense of budgetary workers and
small and medium-sized businessmen.
The Government will hardly have courage to exert pressure on the
oligarchs and will squeeze taxes from ordinary people.
So, we can imagine what economy we have today and what besides being
economical we can be tomorrow.
From: A. Papazian
by David Stepanyan
arminfo
Tuesday, November 22, 19:57
`The economy must be economical.' That's what Leonid Brezhnev, the
Soviet General Secretary of the 1970s-1980s, used to say, and that's
what best fits the Armenian economy.
Besides being economical an open economy must be competitive,
export-oriented and liberal. So, in order to understand why our
economy is not, mildly speaking, so well, we should analyze those
three qualities.
In the last year's global competitiveness index Armenia was just the
92nd among 142 countries but that was 6 positions higher than in 2009.
Inspired by that `achievement' our Government pledged to make their
economy more open but our monopolists will hardly allow Tigran
Sargsyan's Cabinet to do it.
The Forbes' report ranking Armenia as the second worst economy in the
world was a big shock for our authorities and spurred them to do
something to make their economy more competitive. According to Premier
Sargsyan, the key to economic growth is fair competition. And so, he
launched a series of measures to improve the economic legislation and
to boost competition in the country
Given enlarged powers, the State Commission on Protection of Economic
Competition started active measures against unconscientious
businessmen and has transferred to the budget as much as 230mln AMD
($600,000) as a result. Despite such impressive performance, the
Commission is not going to do what it is supposed to, i.e. to fight
monopolies. And so, its activities are just an imitation. $600,000 is
good only if compared with what the Commission collected before but is
nothing as compared with the fines stipulated by the law on economic
competition (from $13,000 to $500,000 per entity). One can hardly
build a competitive economy under such conditions.
Now that the ruling Republican Party of Armenia is preparing for
parliamentary elections it keeps promising to enlarge the exports by
starting to produce import substitutes. This is not a new promise
though. We have been given such promises for over 20 years already and
have seen nothing done to this end this year.
Even though in Jan-Sept 2011 the exports grew more quickly than the
imports (139% against 111%) the negative balance grew from $2bln to
$2.021bln. The current 380 AMD USD rate can hardly stimulate the
export and the traditional pre-New Year AMD appreciation (to 350 AMD)
is meant for the monopolists only and will hardly benefit ordinary
people, who are heavily dependent on USD transfers from abroad.
Though sounding more like a legend the rumors about the super-profits
of the Armenian oligarchs take quite a real shape in the customs
statistics. For example, the customs price of one kilogram of sugar
imported into Armenia by a monopolist is 184 AMD while the commercial
price in the stores owned by the same monopolist it is 390 AMD, i.e.
twice as much. The Commission should have done something about it but
the point is that it has nothing to protect on the monopolistic sugar
market. The same is for the vegetable oil market, where the customs
price is 410 AMD while the market price - 930 AMD per liter. In such a
situation one can hardly orient the market towards export and
substitute import. Or can one? You better ask this question to the
authorities and their monopolist friends.
As regards Armenia's much-vaunted liberal economic legislation, we
must admit that de jure it is not worse than the laws applied in the
most developed countries but de facto it is not effective.
Sept 29 the Armenian Government adopted a draft national budget 2012
stipulating reduction in the budget deficit due to a raise in tax
revenues (from 101bln AMD to 874bln AMD). According to experts, 30-50%
of the Armenian economy is in shadow, so, the Armenian authorities
seem to have a reserve for doing this but in reality everybody knows
that the raise will be ensured at the expense of budgetary workers and
small and medium-sized businessmen.
The Government will hardly have courage to exert pressure on the
oligarchs and will squeeze taxes from ordinary people.
So, we can imagine what economy we have today and what besides being
economical we can be tomorrow.
From: A. Papazian