Siamanto Posted March 16, 2005 Report Share Posted March 16, 2005 ARKA News Agency - Exclusive Interview March 14 2005 T.SARGSYAN: GOVERNMENT SHOULD IMPLEMENT AMBITIOUS PROGRAMS ON ECONOMY REFORMATION Exclusive interview of Tigran SARGSYAN, Chair of the Central Bank of Armenia, to ARKA News Agency. ARKA- Mr. Sargsyan, I'd like to congratulate you on your reelection as head of the Central Bank of Armenia. What the Bank has managed to do for past seven years of your staying in office? T.Sargsyan- We has managed to recover bank system, create new market infrastructures and lessen inflation. Considering this aspect, Armenia is reckoned the country achieving the best result in the frames of International Monetary Fund. Macroeconomic stability has also been reached and bank crises avoided. New instruments for consumers - plastic cards, micro-credits and consumer credits - have been put into operation as well. ARKA- What has not been done for the same period? T.Sargsyan- Effective contacts between bank service and real economy have failed to be established. We haven't managed to lessen dollarization and ensure rapid growth of the country's financial resources accumulation in financial institutions, to implement hypothecary reform, to establish normal relations with media outlets, i.e. with the people conveying information from those realizing policy to this policy consumers. Mentality is also failed to be changed because of above-mentioned processes. ARKA- What is the most important failure? In particular, why effective mechanism of ties with the media has not been created? T.Sargsyan-This is rather political issue, as it is important what reforms are being implemented in Armenia and what is public perception of them, are there leaders in economic area supporting ideas of forming financial and economic system and what is mass media and public reaction to these reforms. To implement these reforms, not only a clear realization of what you want and not only will are needed, but also supporters. It is remarkable that the essence of economic reforms is that the number of supporters should increase at each stage. This indicators show success or failure of the reforms, as the essence of the reforms on transition to market relations is in ensuring of citizens involvement in economic processes. If we fail to ensure that, they'll become bitter enemies to these reforms and will demand to restore the old system, where they hadn't make economic decisions and take care of their own future and everything can be demanded from the government. The key problem is that we have no clear leaders today supporting economic and financial reforms, and there is no public support for these reforms. This is a serious problem. Today's democratic institutions are being used by political activists for harvesting favors from their constituents instead of being used to disseminate advanced ideas. As a result, they are behind of people, not ahead of them. Cheap populism is increasingly becoming widespread and pushing our country back, instead of moving ahead. This is fundamental and conceptual problem we faced today. As a result, reforms implementation problem is pushed to one side and the media doesn't engage in that. It became clear after analysis that financial and economic press is also using populist methods presenting only criticism of what is being done. There are absolutely no articles having clear stance on what needs to be done, how it to be done and indications of decision-makers' mistakes in the press. If so, professionals won't appear in media outlets, as there is no demand for them. On the other hand, the people writing populist articles are in demand today. It hobbles reforms and our country's movement forward. ARKA- Where is the way out of this situation? Does CB set any objective in this area? T.Sargsyan- First of all, the way out is in ambitious programs on reforming economy. The community has to realize that there are such ambitious programs aimed at involving people in the economic programs to be implemented in Armenia. These reforms should enable everyone to make economic decisions, to determine its economic welfare and plan own future independently. That's essence. If we accumulate critical potential necessary in this sphere, it would be a guarantee of our success. How to achieve that? That's the main problem, and professional researchers-journalists writing about financial economic reforms should be concerned about that. They should highlight such issues. What the CB done in this direction? We have organized courses on providing economic knowledge to the journalists highlighting economic issues. We have held a series of meetings with the media representatives, to know their stance and the problems concerning them and, in turn, present them the CB position. This is very important moment, which will get three time greater attention and resources than before to give proper impetuses to the society and receive adequate reaction. ARKA- What will be the CB objectives for the next seven years? T.Sargsyan- First of all, ambitious programs focused on the republic financial system reformation. We will be ahead of all other transition-period countries on paces of financial system reformation. That will guarantee the country economic prosperity, as Armenia isn't rich in natural resources, has no other capacity but intellectual, on which it can orient. And what for intellectual capacity, it can be completely realized only in the event of intensification of all the processes in reformation area. The goals we set are to speed up ambitious programs implementation and increase their volumes. These programs implementation envisages intensification of fundament on our country's macroeconomic stability. We have to ensure low inflation and, at the same time, favorable environment for economic growth. When we say economic growth, we mean the economy oriented on people's intellectual capacity, not the country industrialization. The second direction is the country's financial stability. A new concept of financial stability is planned to be put into practice in the CB. New parameters will be applied in conducting monitoring and regulating financial stability. It means the parameters to be taken into account for stability estimation go out of the bank system frames. At the same time, it is planned to conduct other economic indicators monitoring and regulate them at macroeconomic level using the levers the CB possesses. And the third direction is to make closer ties with real sectors. The CB will publish ratings of economic activeness and citizens' economic expectations, which, as a whole, will show `temperature' in economy. We'll complete this work by the end of the year and economic activeness index will be published for the first time. We will conduct ratings of the enterprises wanting to use the instruments offered by the CB and commercial banks for analysis and to discover opportunities in real sector as well as estimation of risks and spurring the enterprises transparent functioning. Those enterprises having the CB rating will be given access to cheap credit resources and other kind of money attraction. The next direction is intensification of reforming the hypothec credit area, primary market development stimulation, credits standardization in primary market and secondary market development stimulation. Hypothec crediting contains consider capacity for stable economic growth. Along with that, intensification of work on pension reforms and applying new approaches on turning to accumulative pension system, when private accumulative funds will operate in our market, are planning. Transition to accumulative system also contains capacity for stable economic growth. Another direction is corporative papers work in the market. One of major faults of our financial market is lack of corporative precious papers market, because we have no corporations, no open joint stock companies, and this problem should be solved as soon as possible. We are behind these processes, which are going on in real sector. That's why financial system is becoming very vulnerable and risky. Besides, there is no insurance market in Armenia. The World Bank and International Monetary Fund mission that was in Armenia last week recorded in its report that the republic's insurance market is one of the smallest insurance markets in the world. Normal correlation among money, currency and capital markets will be ensured. If these markets won't conform to real sector requirements, it will inevitably lead to crisis while grounds for crisis are laid here. It is obvious that risks emerging in financial, insurance and capital markets are interconnected. That's why a common approach is needed to gauge these risks as well as common methods of their estimation and regulation and common risk supervising body. It is also necessary to think about Armenia's regional development. There are many serious disproportions in it hobbling the republic's economic growth and posing threat for stable economic growth. The government will work out its financial development regional program. It is necessary to adopt programs stimulating crediting in border and mountainous regions and decentralization financial flows from Yerevan. It means development of infrastructures in regions will speed up and expenses transactions and operations connected with services in regions will lessen and, as a result, interest and credits rates will lessen as well. Summarizing that, I can say that the state should ensure macroeconomic stability, create effective protection of property rights and contracts execution as well as to provide effective state services and implement ambitious programs, stimulating sustainable economic growth. ARKA- Does it means that the CB will become the main economic institution in the country for coming seven years, as all the objectives and areas you mentioned go out of bank system boundaries? T.Sargsyan - I'd like to note that above-mentioned programs were in the CB focus for previous years and we have already put forward quite ambitious projects on these issues, including pension and hypothec reforms, and on Armenian financial sector development prospects. This work will be continued as it doesn't beyond our authority. Besides ensuring low inflation, we are also responsible for the country's financial stability. Taking into account the lack of proper infrastructures, it is clear that financial stability is under threat now and the Bank can face criticism because of failure to inform about that in time and make due proposals despite of being the state financial agent. As the state financial agent, we are now working out proper concepts and proposals and presenting them for discussions. The work will be continued. ARKA- Will the total capital normative increased for banks functioning in Armenia? T.Sargsyan - The Central Bank does not consider increase of requirements on minimal amount of the capital as end in itself. It means we should move forward taking into consideration to what economic consequences our any decision leads. At this stage, management corporative culture planting in commercial banks is a principal issue to us. We intends to come up with legislative initiatives this year and submit a package to the government wit description of steps to be taken to bring to life concept of corporative management in Armenia and, first of all, at commercial banks. The fate of capitalization requirements enlargement issue will depend on how much we`ll accomplish in the culture implantation and on consequences of that. Corporative management concept is considered a top-priority issue at this stage. It is envisaged that the concept logic contains rational element - if banks work on corporative principles, they are opened for the community and for new investors and if the corporative system starts functioning, the banks become more transparent and conflict between interests of owners and those of mercenary professional management appears as well as interest to bank capital rises thanks to attraction of new investors. This will help banks to have comparative advantages in competitive environment. ARKA- Are banks ready to adopt the corporative management concept? T.Sargsyan - We have already reached consensus on the majority of the issues. There is still some discord on two or three points, but this is a normal thing, at it is impossible to have unanimous opinion on all points. ARKA note: Armenian National Assembly reelected Tigran Sargsyan as CBA Chairman for the second seven-year term on March 2, 2005. As many as 92 MPs participated in the vote, of which 86 cast their vote for his candidacy. Tigran Sargsyan was born on January 29, 1960 in Kirovakan (at present Vanadzor), Armenia. From 1980 to 1983 he attended Leningrad's Financial and Economic Institute after Voznesenski. From 1983-1987 - postgraduate education ended in obtaining PhD degree. From 1987 to 1990 worked as the Chief of Department for Foreign Economic Relations of Scientific Researches Institute of Economic Planning in Armenia. From 1988-1993 worked at the post of Chairman of republican Council of Young Specialists and Scientists. From 1990 to 1995 - a member of Supreme Council of the Republic of Armenia and the Chair of Standing Commission for Financial, Credit and Budget Affairs. From 1995 to 1998 - Director of Scientific Researches Institute of Social Reforms. From 1995 to 1998 - the Chairman of Armenian Banks Association. Since March 3, 1998, Sargsyan has occupied the post of CBA Chairman. Non-partisan. Married. Has two children. M.V.--0-- http://groong.usc.edu/news/msg105241.html Quote Link to comment Share on other sites More sharing options...
Anonymouse Posted March 17, 2005 Report Share Posted March 17, 2005 One of the planks of Communism is a central bank. Now count how many nation-states have one. Quote Link to comment Share on other sites More sharing options...
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