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THE ARMENIAN ECONOMY HOPES FOR EUROPEAN BILLIONS
Vestnik Kavkaza, Russia
Aug 21 2013
21 August 2013 - 3:32pm
David Stepanyan, Yerevan, exclusively to VK
Despite optimistic statements by the Armenian authorities that the
economy is coming out of a state of free fall, for five years in a
row the country has been suffering economic decline. According to the
World Bank, in 2008-2012 alone, the absolute decline in GDP was 15.1%,
from $11.662 billion to $9.91 billion. The decline in the Armenian
economy comes amid the growing economies of neighboring countries.
However, the authorities prefer to keep these data hushed up, pointing
to the 7 percent growth in 2012. However, this "growth" of the economy
was accompanied by the growth of GDP only from 3.8 trillion drams
in 2011 to 3.9 trillion drams in 2012. Thus, even a non-specialist
understands that in reality, the authorities for the past 5 years
have reduced the volume of the economy. The notorious "growth" only
exists in the statements of the National Statistical Service.
The real state of affairs is reflected by the indicator of the level
of foreign investment, especially FDI. Even according to the National
Statistical Service, the total amount of foreign investment in the
real sector of the economy in January-March 2013 decreased by 11.9%
to 131 million dollars. Direst foreign investment in the real sector of
the economy during the same period amounted to 57.7 million dollars, a
decrease of 35.4%. However, the head of the parliamentary Committee on
Financial-Credit and Budgetary Affairs, Republican Gagik Minasyan, is
inclined to explain the decline in foreign investment by international
trends, uncertainties and crises. He said that in today's world there
is no country in which in 2013 investment growth would be observed.
With all due respect to Minasyan, "Vestnik Kavkaza" was able to find
at least three of these countries, and not in the world but among the
countries of the CIS. In the first quarter of 2013, growth in foreign
investment was recorded in Uzbekistan by 13.2%, in Ukraine by 76%,
and in Belarus by 18.2%.
As for Armenia, the outflow of capital, which has not yet become a
catastrophe according to unofficial figures, last year reached $700
million. The Armenian Statistical Service does not publish indicators
of capital flight, publishing only its inflow. And the outflow of funds
is quite understandable, since investing excess capital in an economy
devoid of growth in the consumer market and having the highest rate
of all possible monopolizations is not that attractive. All this
is accompanied by migration caused by a real deterioration of the
economic situation.
The recent steps of the authorities suggest that they are going to
save the situation through regular injections into the economy. In
particular, it comes with 3.4 billion euros promised by Europe in
the case of initialing agreements on a free trade area (DCFTA) and
associative membership with the EU. This amount will be one of the
links in the chain of logic that drives the Armenian authorities
towards initialing the agreements at the November summit of the
"Eastern Partnership" in Vilnius. Although the idea of the "Eastern
Partnership" was launched by the EU, namely by Poland, in defiance of
the integration ambitions of Russia in the territories of the former
Soviet Union, the Armenian authorities claim that the association with
the EU promises economic prosperity. This occurs against the background
of an information vacuum about the content of the Association Agreement
and free trade zone.
It is unclear what the effect of the DCFTA on the market and the
structure of the economy of Armenia will be after the entry into
a developed and competitive European market. According to European
Commission estimates, DCFTA will allow Armenia "to modernise trade
and economic relations and developing the economy to bring its key
areas in line with European standards." As a result, revenues of the
Armenian economy will grow by 146 million euros per year, or 2.3%
of GDP, which would increase exports by 15.2%, and imports - by 8.2%,
and, correspondingly, improve the trade balance. However, according
to the director of the European Centre for Geopolitical Analysis,
Mateusz Piskorski, the experience of countries concluding similar
agreements indicates that the association led to expansion of outside
players into their markets, which were more competitive than local
producers, especially according to pretty tough EU standards. The
analyst believes that the signing of DCFTA could lead to job losses
in Armenia, as occurred in Central Europe.
Even if the goods produced in Armenia meet European standards, they
will still not be competitive in the European markets. Because of large
subsidies, reaching 30% of the EU budget, the agricultural sector is
supplying products at dumping prices, and, respectively, competing with
the Europeans will be quite difficult for Armenian farmers, given that
this sector in Armenia is not only not subsidized, but also considered
a source of state income. Regardless of the quality of agricultural
products, following the ratification of DCFTA Armenian producers may
be at a disadvantage. Speaking of competition in the field of heavy
industry in general is not possible, and this threatens Armenia,
which supplies to the EU only copper and molybdenum concentrate and
mining products, being a raw materials appendage of the EU for years.
In short, the prospects of DCFTA are not so rosy as they are being
presented by those in power. There is no answer to the question of
whether the Customs Union is beneficial for Armenia. Communication
with MPs, even off the record, shows that the parliamentary majority
does not completely understand this topic, does not know anything and
therefore cannot understand anything. It seems that either Armenia
does not have any dialogue with Russia or it exists only at the top
level, where the fate of a whole nation is determined by one person.
In such circumstances, neither Europe nor Russia knows what to expect
from Armenia and what the surprises from its authorities could be.
http://vestnikkavkaza.net/analysis/economy/44127.html
From: A. Papazian
Vestnik Kavkaza, Russia
Aug 21 2013
21 August 2013 - 3:32pm
David Stepanyan, Yerevan, exclusively to VK
Despite optimistic statements by the Armenian authorities that the
economy is coming out of a state of free fall, for five years in a
row the country has been suffering economic decline. According to the
World Bank, in 2008-2012 alone, the absolute decline in GDP was 15.1%,
from $11.662 billion to $9.91 billion. The decline in the Armenian
economy comes amid the growing economies of neighboring countries.
However, the authorities prefer to keep these data hushed up, pointing
to the 7 percent growth in 2012. However, this "growth" of the economy
was accompanied by the growth of GDP only from 3.8 trillion drams
in 2011 to 3.9 trillion drams in 2012. Thus, even a non-specialist
understands that in reality, the authorities for the past 5 years
have reduced the volume of the economy. The notorious "growth" only
exists in the statements of the National Statistical Service.
The real state of affairs is reflected by the indicator of the level
of foreign investment, especially FDI. Even according to the National
Statistical Service, the total amount of foreign investment in the
real sector of the economy in January-March 2013 decreased by 11.9%
to 131 million dollars. Direst foreign investment in the real sector of
the economy during the same period amounted to 57.7 million dollars, a
decrease of 35.4%. However, the head of the parliamentary Committee on
Financial-Credit and Budgetary Affairs, Republican Gagik Minasyan, is
inclined to explain the decline in foreign investment by international
trends, uncertainties and crises. He said that in today's world there
is no country in which in 2013 investment growth would be observed.
With all due respect to Minasyan, "Vestnik Kavkaza" was able to find
at least three of these countries, and not in the world but among the
countries of the CIS. In the first quarter of 2013, growth in foreign
investment was recorded in Uzbekistan by 13.2%, in Ukraine by 76%,
and in Belarus by 18.2%.
As for Armenia, the outflow of capital, which has not yet become a
catastrophe according to unofficial figures, last year reached $700
million. The Armenian Statistical Service does not publish indicators
of capital flight, publishing only its inflow. And the outflow of funds
is quite understandable, since investing excess capital in an economy
devoid of growth in the consumer market and having the highest rate
of all possible monopolizations is not that attractive. All this
is accompanied by migration caused by a real deterioration of the
economic situation.
The recent steps of the authorities suggest that they are going to
save the situation through regular injections into the economy. In
particular, it comes with 3.4 billion euros promised by Europe in
the case of initialing agreements on a free trade area (DCFTA) and
associative membership with the EU. This amount will be one of the
links in the chain of logic that drives the Armenian authorities
towards initialing the agreements at the November summit of the
"Eastern Partnership" in Vilnius. Although the idea of the "Eastern
Partnership" was launched by the EU, namely by Poland, in defiance of
the integration ambitions of Russia in the territories of the former
Soviet Union, the Armenian authorities claim that the association with
the EU promises economic prosperity. This occurs against the background
of an information vacuum about the content of the Association Agreement
and free trade zone.
It is unclear what the effect of the DCFTA on the market and the
structure of the economy of Armenia will be after the entry into
a developed and competitive European market. According to European
Commission estimates, DCFTA will allow Armenia "to modernise trade
and economic relations and developing the economy to bring its key
areas in line with European standards." As a result, revenues of the
Armenian economy will grow by 146 million euros per year, or 2.3%
of GDP, which would increase exports by 15.2%, and imports - by 8.2%,
and, correspondingly, improve the trade balance. However, according
to the director of the European Centre for Geopolitical Analysis,
Mateusz Piskorski, the experience of countries concluding similar
agreements indicates that the association led to expansion of outside
players into their markets, which were more competitive than local
producers, especially according to pretty tough EU standards. The
analyst believes that the signing of DCFTA could lead to job losses
in Armenia, as occurred in Central Europe.
Even if the goods produced in Armenia meet European standards, they
will still not be competitive in the European markets. Because of large
subsidies, reaching 30% of the EU budget, the agricultural sector is
supplying products at dumping prices, and, respectively, competing with
the Europeans will be quite difficult for Armenian farmers, given that
this sector in Armenia is not only not subsidized, but also considered
a source of state income. Regardless of the quality of agricultural
products, following the ratification of DCFTA Armenian producers may
be at a disadvantage. Speaking of competition in the field of heavy
industry in general is not possible, and this threatens Armenia,
which supplies to the EU only copper and molybdenum concentrate and
mining products, being a raw materials appendage of the EU for years.
In short, the prospects of DCFTA are not so rosy as they are being
presented by those in power. There is no answer to the question of
whether the Customs Union is beneficial for Armenia. Communication
with MPs, even off the record, shows that the parliamentary majority
does not completely understand this topic, does not know anything and
therefore cannot understand anything. It seems that either Armenia
does not have any dialogue with Russia or it exists only at the top
level, where the fate of a whole nation is determined by one person.
In such circumstances, neither Europe nor Russia knows what to expect
from Armenia and what the surprises from its authorities could be.
http://vestnikkavkaza.net/analysis/economy/44127.html
From: A. Papazian