ARMENIA: LAYOFFS CARRY PROTEST POTENTIAL

EurasiaNet
Feb 5 2009
NY

Large-scale layoffs in Armenia are heightening social tensions. Some
observers believe the trend could spur political protests as workers
and business owners grow increasingly frustrated with the government’s
economic course.

The mining industry has been hit particularly hard. Copper, gold,
molybdenum, zinc and lead are Armenian exports with the strongest
ties to world markets, where prices have tanked in recent months.

So far during the global financial crisis, the overall number of
Armenians who have lost jobs, or have been laid off, is in the
thousands, according to a government source who spoke on condition
of anonymity. While some officials argue that the scope of the
crisis is relatively small, Sona Harutiunian, head of the State
Employment Agency, conceded that Armenia’s labor market is "so
small that the [loss] of even several hundred jobs creates serious
problems." The country has an "economically active" population of
just under 1.2 million people, according to the National Statistical
Service. Officially, Armenia’s official 2008 unemployment rate was 6.3
percent, but some non-governmental organizations estimate the actual
rate was as high as 27 percent. No matter what the actual figure was
last year, it is destined to grow significantly in 2009.

In Kapan, a town of 40,000 located near Armenia’s southern border
with Azerbaijan, the biggest employer in town, the Dino Gold Mining
Company, has been closed for three months. Sixty percent of the
majority-Canadian-owned gold processing facility’s 1,526 employees
have been laid off in the time since.

The facility’s employees went on strike for a few days in early
November, when the job cuts were first announced. Intervention by
three cabinet ministers — energy and natural resources, labor and
social issues, and economy — ended the strike, with permanent job
cuts postponed until February 18. Until then, laid-off employees are
collecting two-thirds of their salaries, though they no longer work.

"Nobody can predict what will [happen] after February 18. It depends
on the economic situation in the world," said Dino Gold Mining Company
Director Robert Falleta. The company is one of the largest employers
in the southern region of Syunik.

In an effort to keep Dino operating, the government provided
800 million dram, or over $2.6 million, in bailout assistance
in November. Neither the government nor the factory, however, has
provided any additional details about further assistance plans.

Job cuts have also cost 450 people their jobs at the copper and
molybdenum plant in the southern town of Agarak, some 400 kilometers
from Yerevan. "Today, more than the half of the working population in
Agarak is jobless and the government has to be seriously concerned
about this," commented Arkadi Sargsian, trade union boss at the
Agarak plant. Talks are ongoing with the government about financial
assistance, he added.

A wave of job cuts has also hit Armenia’s industrial north; just
under half of the Armenian Copper Program Company’s 1,044 employees
in Alaverdi were laid off in November. The firm provided 70 percent
of the town’s jobs, according to a local employment agency. Nearby,
in Gyumri, the country’s second largest city, two factories have been
closed since December; in Vanadzor, large-scale layoffs have hit one
chemical plant, while a welding factory has shut down entirely.

Without the Armenian Copper Program Company, Alaverdi Mayor Artur
Nalbandian sees dim prospects for the future. "This problem depends
neither on the state, nor on the company’s management. But I can
say one thing: Alaverdi will not survive without the plant. We have
neither the land for agriculture, nor the means," Nalbandian said.

Meanwhile, Yerevan itself is also feeling the economic pinch. In
December, Armenia’s largest chemical plant, Nairit, which produces
rubber, laid off more than half of its 2,744 employees for four months.

The situation has raised red flags about the likelihood of
protests. While the government has not directly addressed that
possibility, some observers and opposition politicians believe that
protests are a given. "Protests are unavoidable," commented Bagrat
Asatrian, a former chairman of the Central Bank of Armenia, who is
sympathetic to ex-President Levon Ter-Petrosian. "People see that the
state doesn’t take any steps, except delivering beautiful speeches,
and making the tax burden heavier every day."

Failure to slash Armenia’s corporate tax rates only worsens the
situation, added economist Andranik Tevanian, head of the Politeconomia
Center for Economic Analysis in Yerevan. Supporters of Ter-Petrosian
agree, saying that the government should use its foreign currency
reserves to keep factories open.

"Countries across the world reduce the tax burden," Tevanian
commented. "But it’s just the opposite with us. . . . Instead of
providing large companies with money not to cut jobs, they have been
giving promises alone for several months."

Companies with revenues over 58.5 million drams (about $191,000)
must pay 30 to 35 percent of their revenues as taxes; those with less
revenue pay 10 to 15 percent.

Despite the recent bevy of gloomy news, Economy Minister Nerses
Yeritsian is remaining upbeat. "We have overcome the first wave of
the crisis," Yeritsian told EurasiaNet. "We analyze world markets
every day. I can’t say anything at the moment, but I am confident
the situation will improve."

The prevailing mood in mining towns, however, underscore that many
Armenians are deeply worried about the near future. In the southern
region of Syunik, the official unemployment rate already stands at 15
percent. In reality, though, the figure is "twice as much and will grow
drastically, if no serious measures are taken," said Ruben Petrosian,
head of Kapan’s regional employment agency.

In Kapan, the manager of one home appliance store, where sales have
fallen by half in the past three months, could only offer a grim
prognosis: "No plant, no customers."