MINISTER OF TRADE AND ECONOMIC DEVELOPMENT OF RA: ALTHOUGH DRAM APPRECIATES, NO ARMENIAN EXPORTING COMPANY HAS BEEN CLOSED

Noyan Tapan
Nov 02 2006

YEREVAN, NOVEMBER 2, NOYAN TAPAN. "Although the exchange rate of the
Armenian dram against the US dollar has grown from 580 to 380 drams in
the last three years, no Armenian exporting company has been closed,"
the RA Minister of Trade and Economic Development Karen Chshmaritian
said during the November 1 round table "Foreign Currency Depreciation
Impact on Economic Development, Particularly Export" organized by the
Union of Manufacturers and Businessmen of Armenia (UMBA). Repsonding
to questions of the round table participants, K. Chshmaritian assured
them that the appreciation of the dram will not result in closure
of any local company, if exporting comanies have a stable management
system. In his opinion, the improvement of their management systems
and the correct application of laws are more important for Armeian
enterprises than the impact of the dram’s appreciation. Speaking about
the factors contributing to the appreciation of the Armenian dram,
the minister subscribed to the Central Bank of Armenia (CBA) Chairman
Tigran Sargsian’s opinion that they are connected with objective
factors of the increased foreign currency inflow. In particular, in
the last 5 years, exports have increased almost fourfold, while the
number of tourists to Armenia has grown tenfold in the last 7 years.

Besides, in recent years import replacement has grown by 12-15%
annually. At the present time, technological equipment accounts for
25-30% of imports, while goods temporarily imported into Armenia (to
be processed and later exported) – for 20-22% of imports. According
to K. Chshmaritian, it is due to the impact of these factors
that Armenia’s payment balance is positive by 400 million dollars
under conditions of a trade deficit of 800 million dollars. The
minister said that issues of mitigating the consequences of the
dram’s appreciation were discussed at 5 meetings of the RA Economic
Council (composed of the RA prime minister, the chief advisor to
the RA president on economic issues, the minister of finance and
economy, the minister of trade and economic development, and the CBA
chairman), and legislative proposals will be developed based on the
results of these discussions. T. Sargsian in his turn noted that the
CBA prevents sharp fluctuations of the exchange rate by purchasing
currency with profits received from bonds. He expressed an opinion
that the amounts of currency purchase are sufficient, while in case of
greater amounts, credit interest rates and tax rates would rise and
the economic growth would slow down. According to him, superprofits
of the monopoly sectors should be allocated for the technological
re-equipment of Armenian enterprises. Besides, by issuing securities,
companies may attract resources from the population after proving
their financial transparency through a CBA rating: so far only 30
Armenian enterprises have applied to the CBA for such rating. Chairman
of the RA State Commission on Protection of Economic Competition
Ashot Shahnazarian said that one of the reasons for nonregistered
dollar inflow is that economic entities communicate with each other
without signing any contract and making payments in dollars, that
is in the shadow sector. A monitoring implemented by the commission
showed that shadow circulation makes up 50-80% in various sectors of
the Armenian economy. Chairman of UMBA Arsen Ghazarian expressed his
concern that the domestic production will be endangered if taxes on
the superprofits of importers are not raised in the future too. He
also expressed concern that the economic entities with superprofits
may use their money to redistribute their property by acquiring shares
of transparently operating companies.

In his words, the necessity to control the process of the dram’s
appreciation is also conditioned by the fact that previously the
agreement prices of power-bearing substances imported into Armenia
have been calculated based on a higher dollar-dram exchange rate,
which now also affects the prices of transportation services. Chief
Advisor to the RA President on Economic Issues Vahram Nersisiants
said that Armenia with its tax liberalization regime cannot choose
the way of raising the limits of superprofit taxation. He saw the
solution of the problem in improvement of tax administration and the
tax and budgetary policy, since "it is just impossible to curb the
annual inflow of 2.5 billion dollars only by monetary and credit
instruments." According to him, cumulative infrastructures should
be created for "sterlilization" of these resources. It is noteworthy
that in addition to state officials and businessmen, deputies of the
National Assembly, scientits and experts took part in the round table.

From: Emil Lazarian | Ararat NewsPress