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Boomerang Essence Of The "Transfer Economy" In Armenia

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  • Boomerang Essence Of The "Transfer Economy" In Armenia

    BOOMERANG ESSENCE OF THE "TRANSFER ECONOMY" IN ARMENIA

    Vestnik Kavkaza, Russia
    Feb 13 2015

    13 February 2015 - 6:51pm

    Susanna Petrosyan, Yerevan. Especially for Vestnik Kavkaza

    Armenia's accession to the Eurasian Economic Union (EAEU) actualized
    the problems associated with local production, competitiveness of
    Armenian goods, the prospect of their implementation on the domestic
    and foreign markets. Just a month after the country's accession
    to the EAEU, Armenian millers faced a serious potential loss of
    the internal market. Imports of cheap flour from Russia have hit
    the interests of local producers by creating unequal conditions of
    competition. Experts believe that the reason for this is the sharp
    drop in the ruble exchange rate, resulting in exports from Russia
    becoming much more profitable than their own production. But it's
    not just about the situation around the supply of flour.

    For 15 years, Armenia's economy has been orientated toward the
    development of imports to the detriment of local production. This
    economic policy has a political background. According to the economist
    and representative of the Board of the opposition party "Armenian
    National Congress", Vahagn Khachatryan, support for large importers by
    the government due to the desire of the authorities to reproduce, in
    which the major monopoly-importers play the most significant role. As
    a result of the government's economic policy, the core of which is
    still cooperation with a large-scale commercial capital program aimed
    at imports, the country formed a considerable trade imbalance in favor
    of imports, the amount of which is three times higher than exports.

    This trade imbalance leads to the removal of large volumes of Armenian
    currency, which becomes the source of a number of many other problems
    in the economy.

    If we talk about the competitiveness of Armenian products, it is
    necessary to pay attention to its high cost, the cause of which
    remains high. Transport costs make up 10-15% of the cost structure of
    production. But the main reason for the high cost of Armenian products
    is the difficult situation which is being faced by local producers, and
    it is the exclusive way of the economy, and lack of real competition.

    Representatives of the ruling Republican Party of Armenia (RPA) point
    to the high cost of Armenian products which, in their opinion, makes
    no sense to compete with imported goods. Such a statement was recently
    made by an MP from the faction "RPA" Alexan Petrosyan, according to
    whic, the cost of one unit of Armenian products is 64% more expensive
    than the cost of goods imported to Armenia from China or Argentina.

    Firstly, it is unclear which group of goods was mentioned by the
    deputy, and secondly, it doesn't matter how much Chinese and Argentine
    products are cheaper, to their initial value is added transportation
    costs, which ultimately forms the market value of the goods.

    According to PhD in Economics Zoya Tadevosyan, even if such cheap
    commodities do exist, it does not mean that they should be given
    preference at the expense of national manufacturers, which have
    practically been eradicated with the help of the government's policy.

    "Following the logic of the republicans, Armenia needs to give up
    its industry and orient solely towards imports. The economy needs
    developing instead of talking about cheap products. The RPA is trying
    to justify its incompetent economic policy," assumes Tadevosyan.

    The long promotion of monopolistic importers by the government has
    put national manufacturers in a very complicated situation, even in
    such a sector as agriculture.

    Numerously, some experts have expressed concerns that certain contacts
    in customs offices allow importers to deliver much cheaper agricultural
    products than national ones. A row that erupted around tomatoes from
    Turkey a few years ago is a good example.

    The development of conditions for a real, instead of declared,
    competitive business atmosphere may become a solution, though unlikely
    in the light of the current government. In this aspect, it is very
    important that the objective situation in Armenia starts changing
    under the influence of external factors and, most importantly, under
    the economic problems of Russia. The fall of the Russian ruble in
    ratio to the dollar provoked a dramatic fall of transfers sent by
    Armenian migrants from Russia to their homeland in dollars, becoming
    a blow to the "transfer economy" that has existed for over 10 years.

    Reduction of cash transfers has had a negative effect on the consumer
    potential of the population, hence on the volumes of commodities sold,
    many of which are delivered by monopolistic importers. Thus, the
    long exploitation of the "transfer" model, serving the interests of
    importers instead of the development and formation of a differential
    economy backed by local manufacturers, has lead to an arduous
    socio-economic situation, where the interests of ordinary citizens,
    national manufacturers and monopolistic importers are at stake.

    http://vestnikkavkaza.net/analysis/economy/66305.html



    From: Emil Lazarian | Ararat NewsPress
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