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EXPORTS FROM ARMENIA: MISSED CHANCES AND THE REALITY
http://hetq.am/eng/articles/20511/exports-from-armenia-missed-chances-and-the-reality.html
15:34, November 13, 2012
It is known that given the present conditions of globalization, along
with internal factors, external factors also have a significant role
to play for supporting economic growth. Exports are the impetus for
long-term development, especially for countries that have a limited
domestic market, such as Armenia. Thus, in Armenia's case we should
take into account that the exports sector is still far from being a
means for long-term economic growth. The trade deficit for the period
of 2000-2011 composed more than 20% of GDP, which shows a significant
imbalance in foreign trade.
The influence of exports and imports on the national economy is
reflected in their densities in the GDP. The high density of exports
in the GDP proves the national economy's saturation with an associated
manufactured good as well as the competitiveness of the domestically
manufactured good on the international market. In 2011, the index was
13% in Armenia and during the period of 2000-2011, the average of the
index was 14.4%, which is considered pretty good in the world ranking.
Thus, if we consider that the export market is mainly supported through
some non-prospective areas, the picture will change dramatically.
Particularly, when calculating the aforementioned index in
separate sectors, the precious and non-precious metals industry
draws attention. In that sector the index is 34% (when taking into
consideration that the same index is 14% for the total economy, we can
conclude that Armenia specializes in the export of metals, which means
that the export of raw materials is the only specialized industry).
In viewing Armenian exports according to commodity groups, we can say
that during the period of 2000-2011 exports had a significantly high
level of concentration: 84% of exports was on average shared between
four commodity groups (precious stones and metals, non-precious metals,
prepared foods and raw mineral materials).
Moreover, besides the concentration of exports, it is noteworthy that
in the interim, raw materials exceed in exports, where the percentage
of value added created in production is strictly limited. Moreover,
it is subject to significant fluctuations in international prices,
which increases export vulnerability. Therefore, it is necessary
to seriously think about the sources for supporting economic growth
as well as increasing export competitiveness and diversification of
products in Armenia.
At the same time, international experience proves that a high pace of
economic growth is registered in countries where the export structure
changed from low-tech goods to high-tech goods. A specialization
in the export of goods from natural resources is not a guarantee
for high economic growth at all. Therefore, in order to learn the
connection between exports and economic growth, we should analyze
Armenian exports from a technological perspective.
We identify three technological commodity groups: resources (raw
mineral materials, agricultural products and animal and vegetable
products that exclude prepared foods), low technologies (the
reprocessing industry, including goods from precious and non-precious
stones and metals, wood and paper products, food, drink, cigarettes,
textiles, leather and footwear) and high-tech products (chemicals,
including pharmaceuticals, plastics, rubber, equipment and machinery,
devices, land, water and air transport).
According to data from the Armenian National Statistical Service, in
2011 the density of low-tech and high-tech goods in Armenian exports
decreased compared with 2001. Instead, the density of resource
products increased. In spite of this, during that period low-tech
goods had the highest density in Armenian exports (more than 60%
during the mentioned period).
Moreover, during the same period, in the sub-group of common goods
growth in exports was registered in all commodity groups, but the
main segment of this sub-group belonged to raw mineral products
(30% in 2011). The main density for low-tech goods belonged to the
following commodity groups: precious stones and metals (on average
32%), non-precious metals and goods derived from them (on average
23.5%) and prepared foods (in average 12%).
In fact, despite that domestic production growth was registered every
year, during the mentioned period Armenian exports from the perspective
of economic growth support were developed using a very bad model,
registering a number of missed chances for economy development.
Thus, production is not enough; manufacturing products competitive in
the international market is necessary. What potential for production
and exports does Armenia have? The responses to these questions are
in my next column.
Lilit Sargsyan
Scientist of the Institute of Economics, National Academy of Sciences
From: Baghdasarian
http://hetq.am/eng/articles/20511/exports-from-armenia-missed-chances-and-the-reality.html
15:34, November 13, 2012
It is known that given the present conditions of globalization, along
with internal factors, external factors also have a significant role
to play for supporting economic growth. Exports are the impetus for
long-term development, especially for countries that have a limited
domestic market, such as Armenia. Thus, in Armenia's case we should
take into account that the exports sector is still far from being a
means for long-term economic growth. The trade deficit for the period
of 2000-2011 composed more than 20% of GDP, which shows a significant
imbalance in foreign trade.
The influence of exports and imports on the national economy is
reflected in their densities in the GDP. The high density of exports
in the GDP proves the national economy's saturation with an associated
manufactured good as well as the competitiveness of the domestically
manufactured good on the international market. In 2011, the index was
13% in Armenia and during the period of 2000-2011, the average of the
index was 14.4%, which is considered pretty good in the world ranking.
Thus, if we consider that the export market is mainly supported through
some non-prospective areas, the picture will change dramatically.
Particularly, when calculating the aforementioned index in
separate sectors, the precious and non-precious metals industry
draws attention. In that sector the index is 34% (when taking into
consideration that the same index is 14% for the total economy, we can
conclude that Armenia specializes in the export of metals, which means
that the export of raw materials is the only specialized industry).
In viewing Armenian exports according to commodity groups, we can say
that during the period of 2000-2011 exports had a significantly high
level of concentration: 84% of exports was on average shared between
four commodity groups (precious stones and metals, non-precious metals,
prepared foods and raw mineral materials).
Moreover, besides the concentration of exports, it is noteworthy that
in the interim, raw materials exceed in exports, where the percentage
of value added created in production is strictly limited. Moreover,
it is subject to significant fluctuations in international prices,
which increases export vulnerability. Therefore, it is necessary
to seriously think about the sources for supporting economic growth
as well as increasing export competitiveness and diversification of
products in Armenia.
At the same time, international experience proves that a high pace of
economic growth is registered in countries where the export structure
changed from low-tech goods to high-tech goods. A specialization
in the export of goods from natural resources is not a guarantee
for high economic growth at all. Therefore, in order to learn the
connection between exports and economic growth, we should analyze
Armenian exports from a technological perspective.
We identify three technological commodity groups: resources (raw
mineral materials, agricultural products and animal and vegetable
products that exclude prepared foods), low technologies (the
reprocessing industry, including goods from precious and non-precious
stones and metals, wood and paper products, food, drink, cigarettes,
textiles, leather and footwear) and high-tech products (chemicals,
including pharmaceuticals, plastics, rubber, equipment and machinery,
devices, land, water and air transport).
According to data from the Armenian National Statistical Service, in
2011 the density of low-tech and high-tech goods in Armenian exports
decreased compared with 2001. Instead, the density of resource
products increased. In spite of this, during that period low-tech
goods had the highest density in Armenian exports (more than 60%
during the mentioned period).
Moreover, during the same period, in the sub-group of common goods
growth in exports was registered in all commodity groups, but the
main segment of this sub-group belonged to raw mineral products
(30% in 2011). The main density for low-tech goods belonged to the
following commodity groups: precious stones and metals (on average
32%), non-precious metals and goods derived from them (on average
23.5%) and prepared foods (in average 12%).
In fact, despite that domestic production growth was registered every
year, during the mentioned period Armenian exports from the perspective
of economic growth support were developed using a very bad model,
registering a number of missed chances for economy development.
Thus, production is not enough; manufacturing products competitive in
the international market is necessary. What potential for production
and exports does Armenia have? The responses to these questions are
in my next column.
Lilit Sargsyan
Scientist of the Institute of Economics, National Academy of Sciences
From: Baghdasarian