RISE IN PRICES FOR ESSENTIAL GOODS AROUSES DISCONTENT

ARKA News Agency, Armenia
Oct 29 2007

YEREVAN, October 26. /ARKA/. The rise in prices for a number of
essential products in Armenia has not only aroused natural discontent
on the part of population, but also cause criticism of the government
policy.

Against the background of the rise in prices for grain, which caused
a rise in the price for baked goods, vegetable and animal fats in
many countries, phenomena going beyond the laws of market economy
are occurring in Armenia.

The uptrend in the prices for essential products observed late in
the summer was caused by external factors. A survey of internal
and external influence on the food market conducted by the ARKA
News Agency in September, as well as experts’ comments, suggested a
conclusion that the rise of prices for a number of food products was
mainly accounted for by external factors.

Since Armenia has no high-level food self-sufficiency, it cannot rule
out the influence of external factors on influence with large imports
of essential food and agricultural products recorded.

This September, 102.7% consumer price index was recorded in Armenia
compared to last September, with the index of prices for food products
(alcohol and tobacco inclusive) being 103.8%. In January-September
2007, 3.8% inflation was recorded compared to the corresponding period
last year. The index of prices for food products was 104.8%.

However, negative phenomena were recorded in September, when, taking
advantage of the global trends, Armenia’s economic entities entered
into an anticompetitive collusion, which caused an unnatural 60%
rise in the prices for vegetable oil and butter.

The RA State Commission for protection of Economic Competition, also
called antimonopoly commission, guided by the results of monitoring
conducted in August-October, revealed the fact of indirect agreements
on an unjustified rise in prices between 20% of legal entities
operating on the market of butter and vegetable oil.

As a result, about 50 Armenian businessmen were fined, fines imposed
on them being 2% of the proceeds from the products in question in 2006,
but not more than 300mln AMD.

Despite the rise in prices on the world market, the prices were at
least doubled in Armenia. Specifically, the average purchasing price
of one liter of sunflower oil was 556 AMD in August and 950 AMD in
October, while the customs value remained the same, said Head of the
Commission’s Analytical Department Armine Hakobyan.

The opposition immediately responded to the situation and expressed
its concern at the next four-day session of the RA Parliament on
October 22-25. "The price rise has become a social disaster for all
the sections of population. The companies getting super-profits from
the monopoly on the import of some products to Armenia are worsening
the situation for hundreds of thousands of our compatriots," said Mher
Shahgueldyan of the opposition parliamentary faction Country of Law.

According to him, the authorities are not taking any measures. "Of
course, the rise in prices is global, but, for example, Russia,
Ukraine and Georgia are taking measures to protect their citizens.

The Government must bear responsibility to the population and wage
a more active struggle against negative processes," Shahgueldyan said.

He proposed the abolition of monopolies and creation of competition,
especially on the food market.

The member of the opposition faction "Heritage" Armen Martirosyan
proposed the adoption of a special law to regulate the behavior of
economic entities and government bodies in case of price rise. "Under
the country’s Constitution, the Central Bank is supposed to ensure
price stability. Everybody must deal with this important problem and
take strict preventive measures," he said.

The Members of Parliament representing the pro-governmental Republican
Party of Armenia (RPA) addressed the subject as well.

Eduard Sharmazanov said that the major task is to reform the mechanisms
of responsibility applied to unprincipled economic entities.

He added that the fines imposed on them are too small to "put them
off repeating such scenarios".

In this context, talks about increasing fines imposed on economic
entities have been heard in Armenia. Chairman of the Protection of
Consumers’ Rights NGO Abgar Yegoyan proposed raiding the fine for
anticompetitive agreements from 2% to 5% of annual turnover and
reducing the payment terms to 15 days.

In the second ten-day period of October the problem of rise in prices
for food products reached its climax in the form of excitement on
the sugar market.

Rumors about a rise in price for sugar made the population purchase
large amounts of this product. Retailers took advantage of the
situation and raised the price 2-3 times. Some shops sold sugar at
600-700 AMD ($1.84-$2.15) for a kilo.

This market is monopolized in Armenia. The Salex Group company,
owned by the member of the Armenian Parliament Samvel Alexanyan,
covers 84% of the country’s sugar market. Many experts immediately
pointed out the problem of monopoly on the food markets, but after
the importer reduced the price down to 220 AMD in his supermarkets,
everybody accused retailers.

Commission Chairman Ashot Shahnazaryan convened a special sitting of
the Commission on October 23 and stated that the rise in sugar price
was artificial.

"The excitement over the allegedly expected deficit of sugar and the
resultant rise in the price was created artificially," he said.

According to Shahnazaryan, the excitement played into the hand of
the owners of small shops as ten-day amount was sold within a day.

The Commission continues monitoring the market, but stable prices
have been set on the sugar market – 230-240 AMS for a kilo.

The market study showed that Armenia is provided with sugar for the
next six months, and no changes in the price policy are expected
during one year.

RA Minister of Territorial Administration Hovik Abrahamyan said that
the Government will carry out consistent work to prevent a price rise.

He pointed out that artificial excitement on the food market affects
the authorities first of all as it causes public discontent on the
threshold of presidential election.

At present, the Central Bank of Armenia (CBA), by means of its monetary
policy and interest rates, is maintaining stable prices on the consumer
market in conformity with law.

In his earlier interview to ARKA, CBA Chairman Tigran Sargsyan stated
that the CBA is concerned the world prices for imported wheat, grains
and sugar.

He expressed the confidence that, despite the unfavorable situation
on the world markets, the CBa will manage to maintain inflation within
the planned 4% (±1,5%) in 2007.

–Boundary_(ID_0In/si9dq19hy96UT5pNoQ)–