VIOLENT STORM RIPS OFF ROOFS IN LORI
nd
12:41 pm | February 24, 2010
Social
The severe storm of February 23 tore off the tin roofs of seven houses
and one cattle shed in Mets Parni village, Lori Marz. The wind also
topped over an electric pillar.
Fire in drying room
33-square-meter drying room and 15 cubic meters of wood burnt to
ashes as a result of a February 23 fire in the village of Sevkar,
Tavush Marz,
12:52 20/02/2010 » Economy
Panorama.am
Armenian Minister of Finance says economy is in stage of mending
Armenian economy entered the stage of mending. Armenian Minister of
Finance Tigran Davtyan told at `Bridge’ 7th international economic
conference.
He stated irrespective of the crisis the economic condition in Armenia
in 2009 remained stable and manageable. Finance minister stated that
Armenia managed to challenge the difficulties of economic crisis.
Minister Davtyan said that Armenian Government’s provisions came into
force as some improvement is registered. `This gives us a chance to
say that Armenian economic is in the stage of mending.’
Russia warns US against attacking Iran
press tv
Wed, 17 Feb 2010 17:52:35 GMT
The chief of Russia’s General Staff, Nikolai Makarov, has warned the
US against striking Iran over the country’s nuclear program.
"The consequences, I believe, would be dreadful for Iran, as well as
Russia, the entire Asia-Pacific community," Makarov said on Wednesday.
The Russian military chief further suggested that the United States
might turn its military attention on the Islamic Republic once its
operations in Iraq and Afghanistan have been completed.
Amid a US campaign to drum up support for new anti-Iran sanctions,
President Mahmoud Ahmadinejad warned on Tuesday that world powers
would "regret" any moves against the country.
"If anybody seeks to create problems for Iran, our response will not
be like before," Ahmadinejad said at a press conference in Tehran.
"Something will be done in response that will make them (the world
powers) regret [their action]," the Iranian chief executive added.
"However, we prefer they steer towards cooperation [with Iran]."
President Ahmadinejad made the remarks as US Secretary of State
Hillary Clinton was wrapping up her visit to the Middle East, where
she stopped in Qatar and Saudi Arabia to seek the backing of the Arab
world’s heavyweights against Tehran’s nuclear drive.
Tehran says its nuclear program is directed at the civilian
applications of the technology and has called for the removal of all
weapons of mass destruction around the globe.
The West, however, accuses the country of seeking military ends in its
pursuit. The United States has spearheaded efforts to slap new UN
Security Council sanctions against Iran, after the country announced
the production of the first batch of 20 percent-enriched uranium to
make fuel for a medical research reactor in Tehran.
The Examiner
Feb 20 2010
Albuquerque to Armenia!
February 20, 11:35 AM
Albuquerque Travel Photography Examiner
Edward Cardona
Why Would Albuquerque Travelers Want to Go to Armenia?
Why for the chance to take great photos of Mount Ararat where
archeologists have been searching for Noah’s ARK. Armenia is ageless
and as the cradle of civilization wants to rock you. It is like
finding a treasure map of culture. Go to experience nature’s healing
power. Year round you will take home a trip to remember.
Armenia is a Photographer’s Paradise!
Take a lot of film or digital memory cards, because there is a picture
waiting to be taken around every corner. A trip worthy of taking a
tripod, which often a nuisance, but this time well worth the hassle.
See the slide show at the bottom and this link for photo examples:
ml and here is a direct link
to the photographs,
How to Get From Albuquerque to Armenia
Several airlines like United, U.S. Airways, Continental, Delta,
departing (ABQ) Albuquerque for Washington D.C. Then on to London,
Zurich, Paris, or even better Rome where you can connect with Armavia
Airlines, BMI, or to (EVN) Yerevan, Armenia. Or, go in the other
direction via LA to Moscow and onto Yerevan using Aeroflot Russian
Airlines! What an adventure!
At the LA Times Travel and Adventure Show
While at the LA Times Travel and Adventure Show last week you may have
noticed that exhibitors from Armenia and Karabakh made their first
appearance and were greeted by more than 40,000 people. Their booth
was so crowded that you had to wait for a while before getting a
chance to talk with an Armenian and received your DVD of photos and
travel literature. On the first day of the show, every person received
a flier that exclaimed "Welcome to Armenia" and come see the natural
beauty, history, and culture.
You may have seen video clips about Armenia and Karabakh. Enjoyed
Armenian dance groups in native attire performing folk dances each day
of the show. The travelogue and slide show presented by the authors of
an Armenia travel guide, "The Stone Garden Guide: Armenia and
Karabagh," attracted a standing-room-only crowd. They are putting
Armenia on the map reaching a lot of people who may not have heard of
Armenia before. Are you one of those?
Global Beat Stage
On the "Global Beat Stage" the Gevorkian Dance Academy
() performed modern and folk
dances in traditional attire, and by a band of folk musicians. The
Lilia Dance Studio and the Dynamic Duo Dance Studio
() performed Armenian folk dances
on the second day of the show, as well.
Movie Stars Anyone?
Actress Charlene Tilton made a special guest appearance at the Armenia
booth on the show’s opening day. Armenia’s participation at the travel
show was featured on KTLA-TV News with Gayle Anderson
( tla-news-bio-anderson,0,2532206.story),
and also on the Armenian American cable channels USArmenia TV and
Horizon TV.
Courtesy Photos provided by
Take a virtual tour of Armenia at
The Armenian American Chamber of Commerce was founded in 1999 and can
be reached at , and at 818-247-0196.
buquerque-Travel-Photography-Examiner~y2010m2d20-L A-Travel-Show-is-Abuzz-By-Armenias-Strong-First-Ap pearance
APA, Azerbaijan
Feb 20 2010
Head of Iran-Azerbaijan Interparliamentary Friendship Group: All know
that Armenians are aggressors ` EXCLUSIVE
[ 20 Feb 2010 13:00 ]
Baku. Suleyman Farzaliyev ` APA. `Azerbaijan is a developed country
and is moving forward,’ member of Islamic Consultative Assembly of
Iran, head Iran-Azerbaijan Interparliamentary Friendship Group Seyyid
Kazim Mousavi told APA exclusively.
He expressed respect for Azerbaijani people and said the Azerbaijanis
served as an example of honor. Touching on the relations between the
two countries Seyyid Kazim Mousavi said Iran was one of the first
states to recognize Azerbaijan’s independence.
`The people, who sacrificed themselves for the independence of
Azerbaijan on January 20, showed once more how this nation is
courageous,’ he said.
The parliamentarian also touched on Karabakh problem.
`Karabakh belongs and will belong to Azerbaijan, all know it.
Everybody also knows that Armenians are aggressors. Azerbaijan and its
leaders try to solve the problem peacefully. Azerbaijan has a lot of
achievements. It is not right to compare Azerbaijan with Armenia. You
know that we are a Muslim country and always support friendly
Azerbaijani people. We are ready to give assistance for the solution
to Karabakh problem,’ he said.
Appreciating the visit of the delegation led by speaker of Azerbaijani
parliament Ogtay Asadov to Iran Mousavi said he would address the
Islamic Consultative Assembly and participate in the reception
organized by speaker of Iranian parliament Ali Larijani.
According to him, tomorrow the Azerbaijani delegation will meet with
Iranian President Mahmoud Ahmadinejad and chairman of the Supreme
National Security Council Said Jalili.
`They will discuss the development of the relations between the two
countries,’ he said.
The parliamentarian said Ogtay Asadov would leave Tehran for Tabriz.
`I hope these meetings will produce good results,’ he said.
The delegation led by Ogtay Asadov has today left for Iran on a
three-day official visit.
ARMENIA’S PARLIAMENT PANEL TO DEBATE ‘NORMALIZATION’ PROTOCOLS
Today’s Zaman
Feb 19 2010
Turkey
The Armenian National Assembly’s external relations committee is
scheduled to hold a debate today on two protocols signed with Turkey
which aim to bury a century of hostility between the two countries.
"We offered the parliament speaker [the chance] to develop a procedure
of preliminary discussions," Armen Rustamyan, the chairman of the
committee, was quoted as saying on Thursday by an Armenia-based
English-language online news portal, PanArmenian.net.
"According to the NA [National Assembly] charter, international
agreements are included in the agenda and then debated during the
parliamentary session," Rustamyan said, while underlining that the
committee debate will be completely transparent.
Rustamyan also stated that the nationalist Armenian Revolutionary
Federation (ARF, Dashnaktsutiun) will support the ratification of
the protocols only if certain conditions are included in the protocols.
The ARF earlier threatened to attempt to depose President Serzh
Sarksyan if the protocols are ratified by the Armenian parliament.
The normalization process has been thrown into question by the weight
of still-unresolved disputes four months after Turkey and Armenia
signed the two protocols to establish diplomatic ties and open their
mutual border.
Ankara and Yerevan have accused each other of trying to rewrite the
texts, which are the closest the two sides have come to overcoming
the legacy of the killings of Anatolian Armenians during World War I.
PROTOCOLS’ RATIFICATION IS A SERIOUS ISSUE, SAYS MINASIAN
Aysor
Feb 19 2010
Armenia
"The Republican Party of Armenia after hearings on Armenia-Turkey
protocols came to the conclusion that the documents are in our nation
and state’s interests," told journalists the party’s member Mkrtych
Minasian.
"Statements by Turkey and the ongoing processes in Turkey are a cause
of serious concern," he said. "We must be very careful and launch the
parliamentary hearings only after seeing that Turkey’s parliament is
fulfilling its obligations without preconditions."
When asked about possible ratification for protocols by Armenian
parliament ahead of the Turkish one, the politician said that "this
is a very serious issue."
"We must receive documents only if the Turkish parliament ratifies
these two documents," stressed Mkrtych Minasian.
FROM CHURCH TO SPORTS HALL TO MUSEUM IN TURKEY
Hurriyet Daily News
-church-to-sports-hall-to-museum-2010-02-17
Feb 17 2010
Turkey
The Armenian church of Surp Astuadzadzin in the central Anatolian
city of Kayseri will be transformed into a museum after being used
as a sports hall for decades.
"A historical place like the church is not appropriate for sports.
However, sports activities took place here for 30 to 40 years. We
are transferring the sports activities in the church to newly opened
halls," said Yahya Å~^ahan, the Kayseri provincial youth and sports
director.
Å~^ahan said they have the land title for the church, which was also
being used as a youth center and will continue in this function until
the construction of a new youth center.
Å~^ahan said there are plans for a museum project and they may transfer
the church building to Kayseri Metropolitan Municipality. "If that
happens, the municipality may transform [the church] into a museum. A
memo came from the municipality last year for the church building
to be transferred to them, but this request was put on hold later,"
Å~^ahan said transforming the building back into a church was mentioned
but the idea was given up.
Kemalettin Cengiz Tekinsoy, deputy secretary-general for Kayseri
Metropolitan Municipality, said the structure would be turned into
a museum and opening it for service as a church was not an option
because there is no Armenian community in Kayseri. "I believe it can
be a museum after a renovation that would bring back its historical
qualities."
PENSION REFORM IN ARMENIA WILL FURTHER WIDEN THE GAP BETWEEN THE RICH AND THE POOR
ArmInfo
18:37 17.02.2010
ArmInfo. Interview with professor of economics at Ventura College,
California, Ara Khanjian
Do you share the concern of Armenian authorities on aging of the
population in the next few years, which will challenge the State’s
capacity of paying pensions? Do you agree that any raise of pensions
will thus fail to entirely solve the problem, and the transition to
the new system is therefore a must?
An aging population could challenge the State’s capacity of paying
pensions; however the solution of this problem is not necessarily the
adoption of an extreme version of privatization of the pension system
that Armenia’s government is proposing. I call it an extreme version,
because according to the government’s version, in about 25 years,
every employee in Armenia would be obliged to be part of the mandatory,
funded, private pension system. There are few countries in the world,
where the mandatory part of the pension system is based solely on the
private individual pension accounts. Instead of adopting this extreme
version of pension system, the Republic of Armenia, similar to many
other countries, could address the problem of the aging population
through a combination of different steps. One possibility that could
have a significant effect on the ability of the state to pay pension
benefits is to gradually increase the retirement age. The United
States in 1984 decided to slowly increase the retirement age from
65 to 67. Another possibility is to slightly increase the pension
contribution or pension taxes.
In the case of Armenia a major concern is to increase the government’s
ability to generate more pension tax revenues. A major challenge with
this respect is the extent of the shadow or underground economy, where
the employers and employees avoid paying social security (pension)
taxes. This implies that the government should take measures to reduce
the level of shadow economy and corruption. One aspect of Armenia’s
pension system that gives incentive to employees to avoid paying
social security taxes is the fact that the social security (pension)
taxes that the employees pay and the retirement benefits, pensions
that the employees receive when they retire are not linked. Currently
the amount of pension that a retiree receives depends only on the
number of years that the employee worked. It doesn’t depend on the
amount of social security taxes that the employee paid during his/her
lifetime. This implies that if two employees worked the same number
of years, but one employee earned 300,000 AMD per month, while the
other employee earned 30,000 AMD per month and paid much less social
security taxes than the first employee, both of them will receive the
same pension when they retire. The problem of this is that it would
give incentive to the first employee to hide his/her income and avoid
paying social security taxes. There is hardly any other country in
the world that has such a pension system. Therefore Armenia should
introduce changes in its pension system and should link the pensions
with the amount of pension taxes that the employees pay during their
lifetime. There are many countries that have such system and some of
these systems are called "notional" pension system. Armenia, similar
to many countries in the world, could do this without adopting the
extreme privatization system that the government is proposing. The
U.S.A. refused to adopt even a partial privatization of the pension
system in order to address the concern of aging population. There are
only a few countries in the world where the mandatory pension system
is based entirely on private pension accounts.
Another unusual characteristic of the government’s proposal is that
the government is going to contribute 5% of the worker’s wages to
his/her private pension account. I don’t know any other country in the
world which has a similar system. One way that the government could
generate funds to make these 5% donations to the employees’ private
pension accounts is to collect additional taxes, such as income taxes,
VAT, customs etc., from the general public. In my opinion this 5%
government contributions to the employees’ individual pension funds,
is a bribe to entice the current workers to join the mandatory private
pension accounts. What is the justification for the government to
collect taxes from the rest of the population, including people in
vulnerable positions such as non-working population, housewives,
disabled etc., and then give those tax dollars to the working people?
Another way that the government could deal with the 5% donations to
private pension accounts would be to borrow and to make the government
budget deficit even worse. The privatization of the pension system
would make the government budget deficit even worse, because the
government on top of making 5% donations to the current employees’
individual pension accounts is going to continue paying the pensions
of the current retirees. The government is going to pay the pensions
of the current retirees, who don’t have private pension accounts,
through the general taxes collected from the general public. Clearly
the privatization of the pension system will make the government budget
deficit worse and the government would be obliged to borrow more and
at the same time would be obliged to reduce government expenditures
in education, health care, roads, infrastructure, poverty programs,
or even defense. Therefore the privatization of the pension system
would have a negative effect on education, health care and other
government expenditures.
On October 31, 2008 the IMF and the IDA (part of the World Bank
group) experts published a Joint Staff Advisory Note on the Second
Poverty Reduction Strategy Paper, PRSP, where they expressed their
opposition against the privatization of Armenia’s pension system,
specifically in paragraphs 23 and 31. Among other reasons for their
concerns about the privatization of the pensions, the staff of the
IMF and the World Bank was also concerned with the negative impact
of the privatization of the pension system on the government budget.
In conclusion, aging population could generate pressure on the
government’s budget; however the privatization of the pension system
is not the answer to that problem, because the privatization itself
would have a negative impact on the government’s budget. Instead the
government should link pension taxes to pension benefits, giving
incentive to the employees to pay their pension taxes. Also the
government should increase its revenues by reducing the level of
corruption and the shadow economy.
To finance state donations to pensions, the government designed a
united income tax, a merge of social security payments and income tax.
Do you think it will cover the necessary expenses?
Let me take this opportunity and say that in the case of united tax,
the government is proposing a flat income tax of 26%, without any
exemption, which is unfair, because there is no progressivity. The
purpose of having a progressive tax system, where the tax rate goes
up when income increases, is to distribute the burden of taxes more
equally among the rich, middle class and poor taxpayers and achieve
some level of fairness. Most advocates of flat tax or income tax with
just one tax rate support the exemption of certain amount of income
from income tax, usually an amount equal to the poverty line. This
exemption generates mild level of progressivity. According to my
information, in the case of Armenia, the government’s proposal doesn’t
include any exemption; therefore even if someone earns just 20,000AMD
a month he/she will pay 26% of income tax, while someone who earns
400,000 AMD will again pay 26% income tax. This is highly unfair,
because it imposes very heavy burden on the poor and the lower middle
class. In order for the person who earns 20,000AMD to pay 26% tax
or 5200 AMD he/she should reduce the expenditures on food and basic
necessities, while the person who earns 400,000 AMD could pay 26%
or 106,000 AMD without being obliged to cut the expenditures on food
and other basic necessities. I don’t know any country in the world
which has such an unfair income tax system.
In general indirect taxes, such as VAT or taxes on specific products
are regressive, which implies that when an individual’s income goes
down, the percentage of his/her income that goes to taxes increases.
Most people agree that this is unfair for the poor. Therefore the
vast majority of countries in the world adopt progressive income
taxes in order to offset the regressiveness of VAT, sales or excise
taxes and have overall progressive or proportional tax system. When
Armenia adopts a proportional income taxes, overall taxes in Armenia
becomes regressive, because there will not be major progressive taxes,
which would offset the regressiveness of the VAT. This implies that
the tax structure in Armenia would be unfair and the poor, lower and
middle classes will suffer.
This indicates that government’s proposal, makes the upper middle
class and the rich better off twice and makes the middle, lower
middle class and the poor worse off twice. First, when it replaces
the existing pension system based on the solidarity system, with
mandatory private pension accounts, which favors the interest of the
people with high income, and second, when it replaces the current
mildly progressive income tax structure with flat, single rate, 26%,
income taxes, which hurts the interests of the lower middle class
and the poor. Therefore the changes that are being introduced in the
pension system and in the income tax system, favor the upper middle
class and the rich at the expense of the middle and lower middle class.
Within the new system, citizens will be able to deposit their
pension savings in banks and other financial institutions (credit
organizations, etc) that are authorized to manage financial assets. Do
you think that a license of the Central Bank to operate in Armenian
financial market is sufficient to trust them pension savings?
The licensing process is useful to eliminate some risky financial
institutions; however it is not sufficient. Companies operating in the
financial markets must be regulated throughout the year. A major source
of financial markets’ problems is asymmetric information, when one
group in the market, usually the financial company’s top executives,
has more information than the rest. The solution of this type of
market failure is government regulations of the financial market,
by making more information available to the public. In the U.S.,
companies are obliged to provide a prospectus, which describes the
fund’s goals, risks, investments strategies, fees and expenses of the
companies. The companies are obliged to provide annual and semiannual
shareholder reports, which analyze the funds’ performances and provide
funds’ financial statements. Also companies must provide detailed
information about the members of the board of directors. At the same
time there should be clear accounting regulations, and companies must
be audited regularly.
Without such a regulatory environment, introducing a new pension
system, based on mandatory private pension accounts, could be
dangerous. It would be much better if the government of Armenia
first introduces and promotes voluntary private pension accounts and
generates corresponding adequate regulatory mechanisms. Initially the
volume of voluntary private pension accounts would be small; therefore
relatively easy to regulate. Even if there are mistakes or failures,
the damage in such a small market will not be great.
Unfortunately a major problem in Armenia is that the level of
corruption is high. Therefore when Armenia adopts mandatory private
pension accounts, in few years, large amounts of funds will be
accumulated, which could create huge temptation for company executives
or even government officials including regulators to engage in illegal
or risky activities and waste employees hard earned pension savings.
During fall 2006 China’s ruling Communist party fired one of the
Politburo members, Chen Liangyu, who was guilty for mismanagement
and theft of Shanghai’s pension fund.
The problem with pension funds and financial market regulations is
that it could give the impression that abuses and wrongdoings are not
possible. Executives of financial companies could find ways of avoiding
regulations and try to generate personal gains at the expense of the
account holders and shareowners. For example in the case of Armenia,
pension fund managers are allowed to allocate pension funds only in
the stock markets of OECD countries. But it is possible that a manager
of a pension fund company violates the law and instead of investing in
the OECD stock markets, which are relatively safer, invests billions
of the dollars from pension fund accounts in some risky stock market
in Asia or Latin America. The probability for this kind of behavior
to occur in Armenia is relatively high, because of the high level
of corruption and shadow economy. Even if such a person is caught,
there is a possibility that he/she could avoid punishment if this
person has strong ties with the oligarchs of the country.
Therefore, once again, before trying to privatize the pension
system, it is essential to develop the necessary legal and financial
institutions in Armenia, and to reduce the level of corruption and
shadow economy, because high level of corruption and shadow economy
could make adequate regulations irrelevant.
Do you think that legislative requirements to the security of
pension savings (and responsibility of managing company in case of
insolvency) must be firmer than requirements to bank deposits? What
is the experience of foreign countries?
Theoretically, no, banks should be more regulated than private pension
funds, because bank accounts are guaranteed by the state up to a
certain amount, while pension fund accounts are not guaranteed by the
state. Individuals will have the option of choosing specific pension
fund options. Some of these funds will be invested in the stock markets
of OECD countries. If the stock markets in the OECD countries go down,
then the value of individual pension fund account will go down. In
general, states and taxpayers do not protect such individual pension
accounts against this type of losses, because individual account
owners are making decisions about investing in risky and high yield
markets. They could invest in less risky lower yield markets.
Also, when the stock market goes up, all the benefits will almost
exclusively go to the individual account owner; therefore why should
taxpayers support the account owner, if the financial markets go
down and the value of the funds drops? However after the 2008 stock
market crash, many politicians and economists in the U.S. argued that
we need stronger regulations of stock, bond and insurance markets,
and stronger regulations of the individual private voluntary pension
accounts, which in the U.S. are called 401K accounts. At the end of
2008, after witnessing a drastic drop in the value of their private
voluntary pension accounts, many individuals transferred their pension
funds from risky stock funds to safer, low yield pension funds and
missed the rise of the stock market from March 2009 until today. The
end result was that many individuals in the U.S. experienced real
losses in their voluntary private pension funds. The public still
remembers that during 2000, the Nasdaq stock index was about 5,000,
while today after ten years it is still 2,300!, which implies that
if during early 2000, someone invested his/her pension accounts in
a fund linked to Nasdaq, then after ten years his/her account will
still be 50% smaller! For these reasons, the public in the U.S. does
not support the privatization of the current public pension system,
which is fairly similar to the current system in Armenia. One of the
major differences between the current pension system in Armenia and
the system in the U.S. is that, in the U.S. the benefits that the
retirees receive and the pension taxes that they have paid while they
were working, are linked through a complicated formula.
In the IMF and the World Bank report mentioned above, their
staff expressed concerns that in order to implement a successful
privatization it is essential to be able to collect pension taxes
adequately, to collect adequate data on individual employees and to
maintain the pension accounts of individual employees accurately. Also
the IMF and the World Bank staff argued, and most economists would
agree with them, that in order to implement a successful privatization
of pension accounts, it is essential to have well developed and
regulated government debt/bond market in Armenia. The reality is that
the government debt/bond market in Armenia is still in its infancy.
It seems that the government is trying to develop the bond market
in Armenia through the privatization of the pension system, instead
of the other way around. The new mandatory private pension accounts
would generate so much funds in a short period of time, that it
would stimulate the development of the financial markets, such as
the bond and stock markets, in Armenia. It is interesting to note
that during the past five years the Central Bank of Armenia, which
is highly interested and concerned with the development of debt/bond
markets, was aggressively trying to promote the idea of privatization
of the pension system. It was the CBA, not the Ministry of labor
and social affairs, that during March 2008 published a detailed,
208 pages of study about the privatization of the pension system. At
that time the current prime minister was the chairman of the Central
Bank. Most economists would agree that the main and the only goal of
a pension system should be the well being of the pensioners and not
some other goal, such as the creation or the development of stock and
debt/bond markets. The government should take other steps in order
to develop the debt/bond markets in Armenia, such as reducing the
level of corruption and shadow economy and to give incentive to the
rich people and businesses to reveal their money and deposit them in
banks and financial institutions. The reduction of the shadow economy
would have a positive and significant effect on the development of
bond and stock markets.
In conclusion, in Armenia, the lack of developed legal and financial
institutions, the lack of developed and well regulated bond markets and
at the same time the high level of corruption and shadow economy makes
the adoption of mandatory funded private pension system very risky.
Once the new system is in force, the non-working population
(housewives, disabled, etc) will find themselves in a vulnerable
position, as they will have to be content with a zero-level social
pension. Population engaged in farming, who do not get a salary,
will only be able to enjoy third-level pension, e.g. from voluntary
contributions. How can the vulnerability of all those be addressed?
With a privatized pension system, widows and disabled people will
be able to use whatever funds are still available in their or their
deceased spouse’s private pension accounts. Once these funds are
depleted, the widows and the disabled will be treated similar to the
poor people and they will get the payments that the state provides to
the poor people. Supporters of privatization of the pension system,
suggest that if just before retirement a worker ends up with only
a small amount of private pension funds and becomes poor including
his/her survivors and employees with disability, then the government
would provide poverty support to them. Those who criticize the
mandatory private pension system argue that this arrangement could be
against the interests of the employees, because when the government
is experiencing fiscal difficulties, then social programs designed
for the poor tend to be reduced. In other words during economic
difficulties the political will to protect the poor diminishes.
Do you believe Armenian government will keep its declared intention
to leave social spending intact, despite the crisis?
In general, when a country, where the political party in power is not a
socialist party, is facing economic crisis, then government programs
designed for the poor would become vulnerable and the poor would
suffer. Currently the state of California in the U.S. is experiencing
economic crisis and the state government is in a financial crisis. In
California there is no major socialist party. Therefore instead
of collecting more taxes from the rich, the conservative governor
of California, Arnold Schwarzenegger is cutting social spending and
social program. For example, according to Los Angeles Times, during the
past six months, in California 3 million low income adults lost health
benefits, such as dental and vision care. The governor is proposing to
close 328 centers that serve about 37,000 disabled and old people. Also
he is proposing to reduce the financial aid to 200,000 low-income
college students. If in a rich country such as the United States,
during economic crisis the government is reducing its social spending,
then in Armenia if the economy continues to experience economic crisis,
I wouldn’t be surprised if the government slashes programs designed
to help the poor. For this reason pension benefits should not be
transformed to poverty programs. Instead they should be considered
as the right of the retired employees to collect decent pension.
I would argue that if Armenia adopts the extreme privatization model
that the government is proposing, then even the working population
will find themselves in a vulnerable position. With mandatory private
pension accounts, each month the employees would make payments to their
private pension accounts. In the case of Armenia the government also
is going to contribute 5% of the employees’ wages to their private
accounts. Just before retiring, the pension company that is managing
the pension accounts, based on the amount accumulated, would determine
a specific monthly pension that the worker will receive for the rest
of his/her life. The problem is that if just before retirement, for
some reason the amount of funds accumulated in the employee’s pension
account is not large enough, then he/she will receive small pension
for the rest of his/her retirement life and suffer. Privatization of
the pension system would generate two major risks that could reduce
the size of the employee’s pension account and pension benefits:
labor market risks and financial market risks.
First, labor market risks. Employees during their lifetime could
have difficulties with their jobs. They might lose their job or be
obliged to leave the labor force for sometime, because of illness or
for some other reason. Private pension accounts do not protect workers
from these kinds of labor market risks. During years that an employee
is not working, he/she will not be able to make contributions to his
private pension account and before retirement his/her cumulated private
pension fund will be smaller. The result will be smaller pension
benefits and lower standard of living when the employee retires.
Second, financial market risks. With private pension accounts, the
pension benefits that a retiree receives would depend on the timing
of his/her retirement. If the employee retires after a few bad years
in the financial markets, then his accumulated pension funds would be
smaller and the retirement benefits would replace only a small part of
his/her pre-retirement income. The result would be a lower standard
of living for the retiree. He/she could even live in poverty. On
the other hand if the employee retires after many good years in the
financial markets, retirement benefits would be larger.
Another concern is that employees could switch between risky funds
with high yields and safe funds with low yields at the wrong moments
and decrease the value of their pension funds. For example, imagine
that an employee has his/her pension funds in a risky stock fund and
then the market starts to go down. Let us assume that the employee
hopes that the market will go up again and stays in the stock market,
while the stock market continues to decline. During this period the
value of his/her pension fund goes down. Let us assume that finally
she/he gives up and transfers his/her funds from the risky high
yield fund to a safe low yield fund. Then let us assume that after a
few months the stock market starts to go up. Let us assume that our
employee is scared that the stock market once again could go down;
therefore stays in the safe low yield fund. But let us assume that
the stock market continues to go up. Finally our employee realizes
that the stock market is not going down, therefore decides to move
back to the stock market. The result of these transactions is that
the cumulated value of his/her pension fund before retirement would
be smaller. During the last eighteen months, when the stock markets
went down and up, many individuals in the U.S. behaved exactly like
our imaginary employee and transferred the funds of their voluntary
individual pension accounts between risky and safe funds such that
they ended up losing significant portion of their voluntary pension
accounts.
Another problem of mandatory funded private pension accounts is
inflation. If just before retiring the employee buys annuities that are
protected from inflation, then he/she must pay high fees, which would
reduce the amount of the annuity or the monthly payment that he/she
would receive until he/she dies. However if the pension benefits of
the employee are not protected from inflation and the retiree receives
a fixed monthly payment, then the retirees’ pension benefits would
be severely vulnerable from inflation. If during one year the rate
of inflation goes up drastically, for example because the price of
wheat and bread or energy sources go up, then the purchasing power
of the monthly pension benefit that is generated from individual
private pension accounts would go down and the standard of living
of the retiree would go down. Public pension funds in most countries
are protected and adjusted for inflation. On the other hand in many
cases private pension funds are not adjusted for inflation and are
vulnerable to inflation. An employee who works for 35-40 years and
retires should be entitled or should have the right for a reasonable
pension and not a handout designed for the poor. Unfortunately with
the mandatory funded private pension system, after working for 30 or
40 years and paying taxes, if the funds accumulated in the personal
pension account of an employee are relatively small, because of labor
market and financial market risks, then that employee will retire
poor. The advantage of state sponsored, public pension systems is that
all retirees, including disabled and widows are treated with dignity,
instead of being treated like poor people, who depend on the handouts
of the state.
State authorities say that with the new system, wage earners will
be more interested in proper declaration of their incomes by the
employer. Do you think such a motivation will be enough to affect
the behavior of most employers and stop them from declaring "chopped"
salaries?
With the new system, wage earners will be more interested in proper
declaration of their incomes by their employers for two reasons.
First, because of the five percent donation that the government
will make to the individual’s pension accounts. I already mentioned
that, this could be considered a bribe to make the new pension
system attractive to the employees. This is unfair for all those
individuals who are not part of the pension system and don’t have
a mandatory pension account, because they will pay taxes, such as
VAT, and the government will use tax revenues to donate 5% to those
who have mandatory pension account. This will reduce government’s
available funds for other expenditures, such as education, health
care, transportation, etc. Second, there will be a link between the
contributions that the employees will make to the pension system while
they are working and the pension benefits that they will receive when
they retire. However this link could be achieved without the adoption
of the private mandatory pension accounts. Currently, there are many
countries in the world, including in the U.S., where the pension system
is not based on the mandatory private accounts, but there is a link
between the employees’ pension taxes and the pension benefits that
they receive when they retire. This link and not the private accounts
is the main reason why employees will have incentive to declare their
income. Therefore if Armenia, without adopting the mandatory private
pension accounts, reforms its current pension system and generates
a link between the pension taxes that employees pay and the pension
benefits that they receive, then the wage earners will be more
interested in proper declaration of their incomes by their employers.
I should add that in Armenia unemployment is high, except in areas
which requires specialized skills, and that there are no strong
workers’ organizations, such as unions, which protect the interest of
the workers; therefore employees’ power relative to employers is weak.
This implies that employers could ignore the interests of the wage
earners and that wage earners wouldn’t have much influence on the
behavior of the employers.
I would like to make two additional points. First, unfortunately in
Armenia the government is able to collect relatively small amounts of
taxes. According to the latest information provided by the Heritage
Foundation, in Armenia the total amount of taxes collected as a
percentage of the GDP is just 14%. This is very low compared to other
countries, including former Soviet Republics. For example Azerbaijan
collects taxes equal to 18% of the GDP, Georgia 22%, U.S. 28%,
Estonia 31%, Russia 37%, France 46% and Sweden 50%. One explanation
that the amount of taxes collected in Armenia is small is the level
of corruption, where rich families and powerful businesses are able to
evade paying taxes. It is argued that government tax collectors are not
able to collect taxes from powerful businesses; therefore they focus on
small and medium size businesses. If large and powerful businesses are
able to avoid paying taxes, then they will be even more successful in
avoiding making the payments to their individual employees’ private
pension accounts, because the government tax collectors have more
incentive in collecting government taxes, than making sure that the
businesses are making the payments to the employee’s pension accounts.
Second, according to the Armenian economist from Chile, Armen
Kouyoumdjian, many Chilean businesses deduct pension payments from
the employees’ paycheck, but fail to send the funds to the pension
companies. In such cases, employees could hire a lawyer and sue the
employer, but it would be difficult or it could take a long time for
them to win the case and make the employers pay the employee’s pension
payments. In the case of Armenia, it is true that the privatization of
the pension system, could give incentive to employees to put pressure
on the employers to declare the correct income of the employees,
but there is no guarantee that the employers would comply and make
the pension payments even after declaring the true income of the
employees. What could the employee do if the employer is not making
the pension payments to the authorities on behalf of the employee?
Some employers could argue that they couldn’t make the pension
payments, because they are experiencing business problems and that if
they make the pension payments, the business might go bankrupt. The
employee could go to court, but unfortunately there is a significant
amount of corruption in the court system in Armenia, which will make
it expensive and difficult for the employees to win their pension
funds back from the employers.
We could conclude that government’s suggestion of privatization
of the pension system in Armenia and generating a system based on
mandatory funded private pension accounts is against the interests
of the retirees, because these private pension accounts suffer labor
market, financial market and inflation risks, which could reduce the
size of the accumulated private pension funds and reduce the monthly
pension benefits of the retirees, and because in Armenia the necessary
legal and financial institutions aren’t developed yet and there
is a significant amount of corruption and shadow economy. Instead,
Armenia should adopt a non-funded pension system, where the pension
contributions and benefits are linked. At the same time Armenia should
reduce the level of corruption and shadow economy in general and
specifically in the areas of business tax collection, court system,
etc., also it is essential to develop financial markets, such as
government bond markets and their corresponding government regulations.
DATA ON ASTROPHYSICS DISCUSSED BY T.A. MOVSESSIAN AND COLLEAGUES
News of Science
February 14, 2010
"The kinematics of the HH 83 optical outflow, located in the L 1641
molecular cloud, are investigated. Observations were carried out with
the Fabry-Perot scanning interferometer on the 6-m telescope of the
Special Astrophysical Observatory," scientists in Armenia report.
"The H alpha emission line was scanned with a spectral resolution of
R = 8200. The radial velocity along the jet increases with distance
from the source, confirming previous results. It also shows lower
amplitude variations which are not correlated with intensity. Both the
spatial width of the jet as well as the FWHM of the H alpha emission
line in the jet tend to decrease with distance from the source. The
velocity field across the jet demonstrates a decrease from the center
to the edges as well as some evidence for a transverse velocity
gradient. The blue-shifted bow shock is separated spatially and
spectrally into two distinct features, divided by about 2 " and 250
km s(-1), accordingly. Evidence is provided that these split features
correspond to forward and reverse shocks caused by a rapid pressure
increase as the jet begins a new oblique impact on the surrounding
medium. Radial velocity variations lengthwise and transverse to the
jet axis are discussed. Linear extrapolation of the jet velocity up to
the location of the terminal shock region yields the radial velocity
of the reverse jet shock," wrote T.A. Movsessian and colleagues.
The researchers concluded: "The data are consistent with an abrupt
outburst about one thousand years ago which ejected material with
total speeds of up to 400 km s(-1)."
Movsessian and colleagues published their study in Astronomy &
Astrophysics (Herbig-Haro flows in 3D: the HH 83 jet. Astronomy &
Astrophysics, 2009;508(2):773-778).
For additional information, contact T.A. Movsessian, Byurakan Astrophys
Observ, Aragatsotn Reg 378433, Armenia.
The publisher’s contact information for the journal Astronomy
& Astrophysics is: EDP Sciences S a, 17, Avenue du Hoggar, PA
Courtaboeuf, BP 112, F-91944 les Ulis Cedex a, France.