IMF, WORLD BANK SEE QUICK IMPACT FROM TURKISH-ARMENIAN BORDER OPENING

Asbarez
/imf-world-bank-see-quick-impact-from-turkish-arme nian-border-opening/
Oct 6th, 2009

YEREVAN (RFE/RL)-The International Monetary Fund and the World
Bank have reaffirmed their strong support for the reopening of the
Turkish-Armenian border, saying that its positive impact on Armenia’s
recession-hit economy could be felt as early as next year.

Senior officials from the two multilateral US-led lending
institutions welcomed economic implications of the unprecedented
thaw in Turkish-Armenian relations which will result in the signing
of key fence-mending agreements between Ankara and Yerevan later
this week. Speaking to RFE/RL on the sidelines of the ongoing IMF
and World Bank meetings in Istanbul, they said that growing signs of
economic recovery around the world should also reflect positively on
the economic situation in Armenia.

According to the latest IMF projections presented during the global
forum, the Armenian economy will grow by 1.2 percent next year after
enduring one of the steepest declines in the world this year. The
World Bank also expects renewed modest growth in the South Caucasus
country in 2010.

Ratna Sahay, deputy director of the IMF’s Middle East and Central
Asia Department, said the growth rate could well be higher if the
Turkish-Armenian frontier is opened for commerce and travel soon. "Once
the border opens up we think that the impact would be pretty quick
because it would reduce [Armenia’s] transportation costs tremendously,"
she said. "There would also be a lot of indirect impact through trade
in goods and services with Turkey."

"I don’t know if it will happen in 2010," said Indermit Gill, the
World Bank’s chief economist for Europe and Central Asia. "But my
sense is that [positive effects of border opening] can happen very,
very quickly because there are entrepreneurs on both sides that are
very keen to take advantage of business opportunities on the other
side of the border."

"What we find is that countries that are globally integrated tend to
be also pretty regionally integrated as well," said Gill. "And both
of these integrations are very good things. Countries that are more
integrated tend to converge faster to higher income standards.

"So I think these are very positive developments, and if you want to
see a whole body of evidence of why this is a good thing you should
actually look at Western Europe, which was a very divided neighborhood
not so long ago. Now it’s the most integrated neighborhood."

Both officials emphasized the fact that Armenia is a landlocked country
with high transportation costs that hamper economic activity and badly
needed foreign investment. "Therefore, to have access in terms of
transportation through Turkey would be of great benefit to Armenia,"
said Sahay. "At the same time it would also benefit Turkey in terms
of cross-border trade and tourism."

The IMF official said an open border with Turkey would also make
Armenia more attractive to foreign investors. "Armenia has a lot
of advantages vis-a-vis the level of education and skills of the
Armenian people," she argued. "There is also, of course, a big Armenian
population that is outside, which is also going to be looking to see
how opportunities in Armenia are going to expand. So provided that the
policy environment is good, the opportunities to me seem quite a lot."

That border opening would lower the disproportionately high cost
of shipping cargos to and from Armenia is accepted by many local
businesspeople and analysts. But just how quick and positive its
impact on the economy as a whole would be is a matter of contention
in the country. Some Armenian economists believe that it would take
years before the country starts reaping tangible benefits.

The entire Armenian Diaspora and Armenia’s opposition political parties
are opposed to the protocols set to be signed this week, warning
that an open border with Turkey at this juncture would actually hurt
the economy. Armenia’s relatively tiny and weak economy will see its
domestic market flooded with cheap Turkish consumer goods and thereby
hurt many Armenian manufacturers.

President Serzh Sarkisian has ignored much of those concerns and is
continuing to push forward on the issue.