Journal of Turkish Weekly, Turkey
Jan 2 2009

Armenian PM Defends Economic Policies In Face Of Global Crisis

The Armenian prime minister believes the set of measures foreseen by
the government will help Armenia cope with the negative consequences
and minimize the impact of the continuing economic crisis in 2009.

Tigran Sarkisian said more investments in infrastructure development
and several large projects to be launched by the state will provide
new jobs for people to offset possible redundancies elsewhere.

"We should essentially increase our spending in such directions as
infrastructure development, including road and housing construction,
rehabilitation efforts in the [1988 Spitak] earthquake area, projects
in the energy sector, irrigation and drinking-water-supply systems,
which coupled with a drastic increase in lending to small and
medium-sized enterprises will create new jobs," Sarkisian said in an
interview with RFE/RL’s Armenian Service last week.

"Besides we also plan to carry out several large projects that will
provide essentially help in dealing with the consequences of the
crisis," he continued. "These, in particular, include the construction
of the north-south highway with the assistance of the Asian
Development Bank, a program which has regional significance and is due
to be carried out jointly with Georgia, as well as the construction of
a new nuclear power plant, and the construction of an Iran-Armenia
railway. All these programs also imply the creation of new jobs."

Sarkisian also referred to some international evaluations, including
those made by Moody’s International ratings agency, predicting
stability for Armenia in the immediate future.

But he added: "All predictions made in the world today change every
week and it is conditioned by the circumstance that the global
financial and economic crisis is gathering new momentum and there is
no methodology or institution that would be able to make precise
predictions as to how long this crisis will last and what impact it
will have on developing countries. So, I think it would be more
correct if instead of spreading pessimistic sentiments, which by
itself creates negative expectations and deepens the crisis, we should
speak realistically."

Sarkisian concedes that Armenia is expected to end the year with a
tremendous foreign-trade deficit, with imports exceeding exports
nearly fourfold.

But he cited the example of the United States, which "in the past 28
years has imported more goods than it exported and by no means is
among the world’s worst economies."

"Naturally, Armenia has a very serious problem, that is, structural
readjustments are taking place, a new structure of the economy is
emerging, and we should be able to understand what the future of our
economic system is and what structure our economy should have,"
Sarkisian said.

"Many dream of the day when we will have a strong machine-building
sector, when we will manufacture and export goods like those in China
or India. But I think all realize well it is not a future for us," he
added. "Our strategy is to focus on an economy based on labor and
intellect rather than materials, which means that we should primarily
pay attention to the balance of payments, not the export of
commodities, but the export of services, and carrying out economic
activities not only in the territory of Armenia, but also in its
worldwide diaspora."

The prime minister is hopeful that Armenia will manage to carry out
successful reforms required for continued U.S. government aid under
the Millennium Challenge Account.

"We have, indeed, made pledges to our own people to make these
reforms, also in terms of forming a system of good governance. It is
not a secret that we do have numerous difficulties, such as
corruption, bribery, an ineffective governance system, low revenues,
the presence of more than a hundred thousand socially vulnerable
families, and we should overcome these difficulties also due to the
Millennium Challenge Account program," Sarkisian said.

"We are extremely grateful to our American partners for the technical
assistance that they have rendered to the Armenian government so that
we can overcome all these existing difficulties," he
added. "Therefore, we have developed a clear program, which has also
been appreciated by the Millennium Challenge Account office. And the
program of these measures has a timetable and people who is in charge
of ensuring its proper execution."

Government Reforms

Sarkisian also rejected allegations by some government critics that in
the past several months the central bank has reneged on its adopted
"floating" policy for currency exchange rates and has sought to keep
the national currency from depreciating against major world currencies
with financial interventions on the foreign-exchange market.

"Our concept that we have developed together with the International
Monetary Fund in 1993 implies that Armenia sticks to the so-called
"floating" exchange rate policy for its national currency, which means
that it is formed by the supply and demand existing on the market. We
have remained committed to this policy and will stay committed to it
in the future. We are not going to make artificial interventions in
the formation of the exchange rate because it is fraught with many
consequences," he emphasized.

Sarkisian also spoke in favor of creating equal conditions for
competition in the agricultural sector, though he said this would not
include protectionism. He also said that beginning next month, large
agricultural enterprises will have to pay value-added taxes like
enterprises in other sectors do.

"This strategy implies that agriculture, like in any country of the
world, should also be taxable," he said, noting that the sector has
been exempted from all taxes thus far.

The prime minister also reiterated the government commitment to fight
corruption and stressed the role of the active engagement of
civil-society organizations and opposition political parties in the
anticorruption measures.

"That’s why I urged all opposition political parties to have an active
participation in our anticorruption program, in particular through
monitoring, which is one of the key instruments," Sarkisian said,
adding that this control will essentially increase public faith in the
program and will raise its efficiency.

Rejecting Restrictions

Responding to the question about the state of democracy in Armenia in
a year that has seen plenty of criticism from various international
organizations of how Armenia has been handling its worst-ever internal
political crisis, Sarkisian said: "Freedom of speech, democratic
values do not imply that our country should be sliding into
chaos. Freedom of speech is not arbitrariness. People should also have
a sense of responsibility."

In particular, he responded to opposition claims that the authorities
restrict its freedom of assembly by refusing to provide space for its
political gatherings.

"We provide the government conference hall to organizations on a
contractual basis and if so, the rules stipulated by the contract must
be respected," he said. "We have added one point to our contract that
if an organization fails to observe the rules, then it does not get
the conference hall at the second time of asking. This is a democratic
approach…. If we do not respect our word ourselves, no one will
respect it."

Sarkisian also denied any political implications behind the
parliament’s decision to suspend the tenders for TV frequencies in
view of the mandatory digitalization of broadcasting in the
country. Government critics say the move is primarily aimed at
preventing A1+, a television station critical of the authorities, from
returning to the air after it was controversially pulled off in 2002.

Sarkisian said he regrets that the decision to postpone tenders for TV
frequencies has become a matter of political speculation.

"All international organizations with which I have dealt with
regarding this matter fully accept our reasons. Furthermore, we had no
alternative to this decision," he said. "We could not announce a
competition for two years because we have an international commitment
to achieve digitalization in the broadcasting sphere and time should
be given to the private sector to get ready for the tenders in which
this transition that we must complete within five years should be
considered."

The prime minister also disagrees that financial penalties against
Bjni, a leading mineral-water producer, are in any way linked to its
owner, pro-opposition lawmaker Khachatur Sukiasian, who has been in
hiding since the start of the government crackdown on opposition
members who backed to former President Levon Ter-Petrossian in the
February presidential election.

"I do not agree that there is any political persecution in this
case. But I agree that one must not be persecuted for political views,
especially in the economic sphere," he said. "As for Bjni, it is
obvious that the company made serious violations, evaded taxes. And I
would want you to focus on this issue in the first place. Didn’t it in
fact evade millions in taxes? It is essential to answer this question
and by answering it we will refrain from such political speculations.

"The exercise of tax control started a long time ago and it concerned
not only Bjni, but also other enterprises, including those working in
the same sphere. Such violations were found at many enterprises. But
unlike Bjni those enterprises admitted their fault and fulfilled their
tax obligations. Meanwhile, Bjni is trying to politicize the matter to
avoid fulfillment of obligations that it has toward the state budget,
which is inadmissible," the prime minister concluded.

Source: RFE/RL
By Anna Israelian, Ruben Meloyan
Friday, 2 January 2009