ARMENIA: EXPERTS SAY GOVERNMENT’S ECONOMIC CRISIS-PREVENTION PLAN LACKS SPECIFICS
Haroutiun Khachatrian

EurasiaNet
Nov 21 2008
NY

The Armenian government has unveiled a plan to mitigate the effects
of the global economic slowdown. Experts in Yerevan say a lack of
specifics makes the plan difficult to evaluate.

Prime Minister Tigran Sargsyan outlined the government’s intentions
during a speech in parliament on November 12. Two of the central
elements in Sargsyan’s strategy to maintain growth are a public
works initiative and a stimulus package for small- and medium-sized
businesses. Sargsyan also indicated that Yerevan would pursue loans
from international financial institutions, including the World Bank
and the Asian Development Bank.

On November 20, the government undertook its first concrete
crisis-prevention measure, allocating $50 million for a fund
designed to support small-scale entrepreneurs and keep employment
levels steady. In the sphere of infrastructure projects, Yerevan’s
attention is focusing on the construction of a rail link connecting
Armenia and Iran.

So far, the global credit crunch has not punished Armenia too
severely. The GDP growth rate for the January-October period this
year stood at 9.2 percent.

But there are several causes for concern on the horizon. First,
officials are closely monitoring prices for Armenian export
commodities, such as copper. The price of copper hit a three-year low,
$3,375 per ton, before recovering slightly on November 21. A continued
decline could seriously dent Armenia’s export earnings.

Far more worrying is an anticipated dip in remittances sent home
by labor migrants and relatives abroad. Russia has attracted labor
migrants from all over the former Soviet Union. [For background see the
Eurasia Insight archive]. But with Russia now experiencing profound
economic difficulties, many jobs normally filled by labor migrants,
especially in the construction sector, are rapidly drying up. [For
background see the Eurasia Insight archive]. Remittances in recent
years have totaled about $2 billion annually, providing a vital source
of income for many Armenians.

Expert reaction to Sargsyan’s November 12 speech differed. But all
economic analysts contacted said the government needed to provide
more details.

Some applauded the government for trying to anticipate trouble. "It
is very good that the government has presented its general policy
and the measures listed are, in general, correct. It remains to be
seen how theses measures will be implemented," Heghine Manasian,
a Yerevan economist, told EurasiaNet.

Others expressed skepticism about the government’s intentions. Bagrat
Asatrian, a former chairman of the Central Bank and now a professor at
the Yerevan State University, said it was impossible to evaluate the
plan presented by the prime minister, as it lacked a clear outline
of practical measures. "The 2009 budget presented by Sargsyan at
the same session of the National Assembly contains no funds for the
so-called anti-crisis measures listed by him," Asatrian noted.

Sargsyan has said that the government would amend the budget to
include funding for specific stabilization measures, once the
scope of the challenge facing Armenia becomes clearer. Meanwhile,
Finance Minister Tigran Davtian has said the government would fund
crisis-prevention measures with money in a state stabilization fund,
along with international loans.

But Asatrian said that even if the government succeeds in amending
the budget, policy questions would remain.

"The prime minister said the government could provide subsidies,
or take a stake in the companies that ‘meet the criteria of
the government.’ But what are these criteria? And, what is more
important, will the government be able to counter the current practice
of protectionism and monopoly in the Armenian economy?" Asatrian
asked. "I am afraid that these subsidies would go to those who are
"friends of the administration" rather than companies that are
beneficial for the Armenian economy and really need support."

In addition to outlining a crisis-prevention strategy, Sargsyan
expressed a desire to implement measures to improve corporate
governance. To that end, he proposed that large companies, defined as
having annual sales in excess of 500 million drams ($1.5 million),
be required to carry out external audits. Manasian, a member of the
Central Bank’s independent Experts Panel, praised the proposal, but
noted that previous efforts to promote corporate transparency had
fallen flat. "Maybe under crisis conditions the government will be
more successful in imposing new regulations," she said.

Editor’s Note: Haroutiun Khachatrian is a Yerevan-based writer
specializing in economic and political affairs.