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Armenian politicians taking economy hostage

15 August 2014 09:25 (UTC+04:00)
Armenian politicians taking economy hostage

By Sara Rajabova

The Armenian politicians and pro-government media constantly voice populist statements about the growth of the welfare of the population, economic development of the country and its bright prospects.

But these statements have no basis in reality. Stagnation has affected almost all sectors of the Armenian economy. The local newspaper, Jokhovurd has recently published some interesting data on retail trade of the country.

The number of retail facilities in Armenia fell to just over 16,000 in the first quarter of this year, according to the newspaper. Small business is suffering even more - the number of kiosks throughout the country has dropped by almost 500 units over the last year reaching 3.4 thousands units. The title of the article speaks for itself - "Small and medium businesses is consistently destroyed in Armenia."

Entrepreneurs often receive new shocks from the authorities, who are supposed to protect and encourage them. The Armenian government's initiative to open an export insurance agency that announced in last October did not last for even one year: the Armenian Cabinet of Ministers abolished this agency referring to what it called failures of the body. It was assumed that the structure had to take on the burden of the risks faced by exporters.

Export is one of the main engines of private business. Only a company, strong, successful and confident in terms of the quality of manufactured products, can successfully gain a foothold in the international market. It is clear what prospects this step can create for entrepreneurs. However, none of previous sentences dealt with Armenian business. This is because the country has been suffering from lack of export opportunities and mismanagement of the government.

A while back, the story of a small garment factory operating in the Armenian city of Vanadzor had caused great resonance in the Armenian media. The enterprise was engaged in processing of raw materials and exporting finished products to Europe. Its Director Yuri Mikaelian was going to establish a business partnership with major foreign brand of fashionable clothes. The factory even performed a pilot order in the hope of signing a long-term contract with foreign company but received a "gift" from the government in the form of arresting of its bank accounts and confiscation of its properties. As a result, the company failed to deliver its pilot order, and the contract was never signed. Mikaelian said the factory appealed to President Serzh Sargsyan, Prime Minister Gagik Khachatryan, Minister of Justice and the Union of Employers for help but to no avail.

"We got such an impression that there is no government in this country. They do not want to help entrepreneurs create new jobs and prevent people's emigration. We have repeatedly appealed to the government for assistance but we never received anything," Mikaelian said.

The negative consequences of the decisions of the Armenian government affect not only small businesses, but also the entire population. Thus, in early August, the government announced that the introduction of compulsory health insurance would be postponed once again. The officials, who used to support the idea of enforcing the plan in 2015 to protect the workers decided to keep silent and forget about it completely.

The message of Armenia's Central Bank about the volume of money transferred to Armenia from abroad gave the finishing touches of this cheerful picture. It's no secret that large parts of the working population of Armenia are living in Russia. Monthly money which is transferred to home by these migrants plays an important and sometimes pivotal role in shaping the income of their families. But the volume of direct remittances from Russia in June fell by almost five percent and was $ 134.8 million. Moreover, this figure is still 11.9 per cent higher than in May.

It should be noted that the share of Russian transfers in the total volume of private transfers to Armenia exceeds 80 percent, with a total value of about 16 percent of the country's whole GDP. Thus, it becomes clear how much the Armenian economy is dependent on remittances from Russia and how fluctuations in the indicator are affecting the living standards of ordinary people.

Sooner or later, Armenian government has to find some convincing replies for some embarrassing questions, because the noodles hanging on the ears are not suitable for human consumption. Big words, victorious rhetoric and attempts to divert the public attention from pressing problems are only some successful ways for the government to take a breath and to avoid a new wave of criticism. However, this tactic cannot be effective in long term.

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