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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
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