Former prime ministers of Armenia present their opinions of how to get
out of economic crisis

YEREVAN, MAY 29, NOYAN TAPAN. There are now two crises in Armenia, one
of which is conditioned by the impact of the global financial and
economic crisis. The second crisis began long ago and is conditioned by
the transition period of the economic development and by domestic
problems. So far there have been no projects that would give Armenia an
opportunity to benefit from the global financial and economic crisis.
The first prime minister of Armenia, currently the chairman of the
Public Council and the National Democratic Party Vazgen Manukian
expressed this opinion at the May 25 sitting "Armenia. Future
Directions of Economic Policy" of the economic forum "Armenia.
Confronting the Global Disaster". Many of Armenia’s former prime
ministers made speeches at this forum organized by Policy Forum Armenia
organization (Washington).

In the words of Armenian prime minister in 1991-1992, currently the
chairman of the Constitutional Court Gagik Harutyunian, in order to
reduce the negative effects of the global financial and economic crisis
on Armenia, it is necessary to make system tranformations rather than
partial reforms – in anticipation of qualitative changes.

In his opinion, the indicated effects will not be overcome if the
legislative, executive and judicial branches of power do not confront
in a balanced way the challenges caused by the crisis. He said it is
necessary to take such steps which will allow implementing efficient
structural reforms in terms of creating a competition environent and
establishing constitutional democracy and lawfulness.

The Armenian prime minister in 1993-1996, head of Freedom party,
economist Hrant Bagratian said that according to forecasts, if economic
growth slows down by 3.4% in global economy in 2009 on 2008, then this
slowing down will make 12.6% in Russia, 14.1% in Ukraine , and 16.8% in
Armenia. And it happens in the case that these countries do not
participate in the secondary values’ market whose collapse caused the
global financial crisis. Nevertheless, the crisis aggravated the
domestic problems existing in the indicated countries, and the impact
of these problems is greater than that of the global crisis. In the
view of H. Bagratian, Armenia, in which the social policy is not
targeted and the pensions and salaries are low, will not withstand the
impact of the crisis.

In his words, high indices of Armenian GDP in the past few years were
conditioned by the fact that during their calculation an old
methodology having to relation to modern realities was used.

According to H. Bagratian, a fall in prices has been recorded in many
countries, whereas 9.7% inflation exceeding 4fold the pre-crisis index
has been recorded in Armenia.

When speaking about the impact of the global crisis on Armenia, Russia
and Ukraine and their internal crises, the economist said that these
countries suffer from both political and economic structural crises,
including a fiscal crisis, a rise in the level of monopolization and
corruption, and a crisis related to the judicial system and development
of small business.

He said that in contrast to the slowing down of the Armenian economy,
GDPs of both Azerbaijan and Georgia grew in the 1st quarter of this
year when economic growth of Azerbaijan was likely to slow due to the
fall of international oil prices, while economic growth of Georgia –
due to the fall of transit transportation volumes.

H. Bagratian noted that they in Armenia should not have been so pleased
with the double-digit indices of Armenian GDP growth in the past few
years because in reality, despite the growth of its economic indices,
Armenia in particular lags behind Azeraijan: in 1996 Armenia’s GDP made
3 billion USD, Azerbaijan’s GDP amounted to 5 billion USD, while in
2008 these indices made 17 billion USD and 85 billion USD respectively.
Besides, in 1996 the average monthly salary made 32 USD in Armenia and
25 USD in Azerbaijan, while in 2008 these indices made 250 USD and 400
USD respectively.

H. Bagratian characterized the peculiarity of Armenia’s economic crisis
first of all by the monopoly on import. He said that the recent
amendments to the Law on Taxes envisage the presence of a tax agent at
big enterprises, but do not envisage such an institution with respect
to importers. The other peculiarity is related to the export of capital
from Armenia and it reached 1 billion USD in 2008. Besides, Armenian
economy depends on foreign remittances which amounted to 3 billion USD
in 2008, while a decline in their amount has been observed this year.
The economist considered as negative the fact that in 2004-2006 the
national currency appreciated 2fold against the US dollar (the highest
index in the world), and during the same period the national currencies
of other countries depreciated by about 20%. Whereas, in the opinion of
H. Bagratian, the money accumulated as a result of the inflow of
dollars into Armenia should have been spent on implementation of big
investment programs. Another sign of the deepening crisis is, in his
view, the fact that in 2008 Armenia’s imports exceeded 4fold its
exports, whereas in the past months of 2009 imports exceeded 6fold
exports.

Speaking about ways out of the the crisis, he pointed out to a ban on
provision of foreign currency credits and deposits in Armenia, along
with establishing a floating exchange rate for foreign currency.
Besides, banks should have no right to make investments in the real
sector of economy. In his opinion, among other ways out of the crisis
are demonopolization of import, re-direction of financial resources
from construction to production sectors of the economy through a
correct tax policy, introduction of progressive income tax,
depreciation of the dram, ban on re-crediting, and development of the
capital market.

According to the prime minister in 1992-1993, former speaker of the RA
National Assembly, chairman of the Christian Democratic Union Khosrov
Harutyunian, one cause of the economic crisis in Armenia is that the
government has not established partnership-based relations with small
and medium businessmen, and their negative opinions about activity of
the tax service bear evidence of that. Whereas, in his words, the state
should regulate the market by intervening cautiously so as not "to harm
by accident the hen laying gold eggs".

The Armenian prime minister in 1999-2000, head of Republic party Aram
Sargsyan expressed an opinion that one of the causes of the economic
crisis in Armenia that the officials who live by "getting into pockets
of businessmen" have more benefits than the businessmen who create jobs
but break laws and strive for monopoly. "Armenia will not overcome the
economic crisis unless it solves these problems. Only political
measures are the way out of this situation," A. Sargsyan said.

It should be mentioned that H. Bagratian was the only one to accompany
his speech by "digital" analysis. The current prime minister of Armenia
Tigran Sargsyan was also among those invited, but he did not attend the
event.