FAILURES OF THE OUTGOING YEAR

[MosJan]

FAILURES OF THE OUTGOING YEAR

Despite promising economic growth tendencies, concerns do not subside

The outgoing year can be described as “successful,” in terms of economic progress. A nine percent growth was reported, the prices are practically stable, the foreign trade balance has improved by 10 percent and the overall number of jobs has increased my some 44.000.

 

 

Despite the fact that the reliability of these statistical figures is sometimes questioned, the tendency, doubtless, is positive and some new positive changes are likely to emerge as a result of president Kocharian’s official visit to Iran. But I would like to focus on a range of failures and mistakes the Armenian authorities have experienced in 2001.

 

 

Energy distributing networks

Failure of the government to privatize the energy distributing networks was the worst loss. Its consequences are evident.

 

 

1. Strategic investors that were about to bring their investments to Armenia, did not come and this, in turn, scared off other potential investors.

 

 

2. The country did not get huge money revenues, which could significantly ease the issue of paying Armenia’s debts (for example, there would not be a haste to allow Russians to take hold of controlling stakes in several Armenian enterprises in return for debt).

 

 

3. We have lost a brilliant opportunity to put end to losses in the energy sector, to crack down on corruption and help financial rehabilitation

 

 

4. The budget crisis has aggravated as energy sector is not able to pay its debts

 

 

Future analysts will provide a more thorough analyses of what a blow the country got because of the people, who helped the failure to sell the networks. Those who were scaring the people by “lost of strategic partner (Russia), now we can witness how it has ignored us), or those who were voting in parliament against the networks privatization, because the “people are against it,” or those who were shouting that the lesson of Armentel was enough. But however, the biggest blame is on the authorities. Not because that it is the authorities who are responsible for domestic developments, but also because of their full capability of taking this deal to a successful conclusion. During his latest news conference president Kocharian noted that the acting constitution gives him enough authorities to act in critical situations.

 

 

It was only to realize that the privatization of the networks was such a critical situation and that the authorities should have used all the levers to successfully conclude that deal. But they did practically nothing. What is worse is that the power grid system, which should be one of the most reliable and profit-making economy branch is not able to pay its workers’ wages, despite the fact that Armenia is the most politically stable country in the region in addition to the strong positions of the authorities. In short, let us hope that the failure in this area would be president Kocharian’s biggest failure and that he would not experience a new such one.

 

 

Armentel epic

I once said that I could not agree with those assessments that describe the Armentel deal as a “bitter experience.” The only fact that the government has sided with the population in this case against Armentel, but in the case of energy networks it could not do it, gives us reasons to say that the experience was “sweet.” But the authorities seem to have been doing everything to make it “bitter.” No one forced the government to conclude the deal with the Greek OTE, the owner of Armentel, as a result of which $300 million have already been invested in the country. Will we ever have a second such investor?

 

 

Now it wants to introduce per minute charges for domestic conversations, as stipulated by the takeover contract, to bring back the invested money. Did it violate an article of the contract and is the government against it? O.K. But both sides should have acted in civil way to overcome the stand off (but how could they, given three changes of communication and transport ministers within one year?) The worst thing is that the government is intent to continue its wrong policy and is against introduction of per minute charges next year as well. The scheme is very simple, each one of the five Drams, paid for telephone conversation, will go to the state budget to pay old age pensions, social allowances and public sector worker . Foreign ambassadors in Armenia repeat that potential investors are scared to bring their money to Armenia, as the two big investors-Armentel and Pernod Ricard, the owner of the Yerevan Brandy Company, have problems with the government.

 

 

Investment environment

We should admit that the government has failed to succeed in attracting foreign investments. This failure should also be placed next to others, not only because of the crucial importance of investments for moving the economy ahead, but also because this policy was declared as the government’s priority. The main reason is the domestic atmosphere- the practice of extracting advanced tax payments from businessmen and in general, the unfair tax field. It appears that petrol importing, which are truly believed as number 1 profit-bringing business, is working with losses. The impression is that the state propaganda is directed to only those, who view the Public TV or read the semi-official daily Hayastani Hanrapetutyun.

 

 

Look at Russia, which has significantly lowered taxes, even foreign leaders sent a wave of congratulatory messages to Putin for this move. But did foreign investors learn that Armenia’s economic legislation is rated as the freest among other CIS and is described as free as that of France, that crime rate is the lowest in Armenia. As a result, six years after the victory in the war over Karabagh, Armenians continue leaving their homeland.

 

 

It is painful to fix that the reasons of all this is in the first place the weakness of the authorities. The government is not a united team, furthermore it is not able to see any prospect for development. The Public TV is more important to it than the science. The relations between the president and the government are difficult to comprehend. The president either displays Olympic indifference or plunges into such details that even ministers can envy his knowledge.

 

 

If the situation continues like this, next year, when the stability will fall down, when constitutional referendum start of pre-election campaigns are expected , the developments would not get more organized.

 

 

By Harutyun Khachatrian

 

© Copyright AZG