Tuesday, October 14 2014

 

The intensifying sanctions against
Russia have already resulted in considerable reduction in transfers from Russia
to Armenia, which is joining the Eurasian Economic Union. To all appearances,
the authorities are not so concerned with this tendency. Are you concerned with the situation? 

 

Of
course, the transfers equal to the budget of Armenia play a very much great
part in the social and economic life of the republic. Nevertheless, it is wrong
to watch them as a long-term panacea for local problems. Today the transfers to
Armenia are declining because of worsening of the living standards in Russia,
and because of the worsening of the attitude to the labor migrants. This
results in the situation when it becomes more and more difficult for the
Armenians to work in Russia. Many of them are taking their families to Russia.
This results in considerable reduction of transfers to Armenia. Therefore,
Armenia's development should be linked not with transfers but with direct
investments. The government, staying aside, simply watches how social problems
have been resolved without its meddling, and make it possible to avoid at least
food riots. One should take into consideration that 20% of transfers enter the
state budget in the form of VAT, the rest also enter the state budget as
various indirect taxes. Nevertheless, to ensure the high quality development of
the Armenian economy, industry, we need direct foreign investments, first of
all.

 

Would you specify the figures and time of investments, which will
relieve Armenia of its dependency on transfers? 
 

 

The
matter concerns 2-3 billion EUR. Such investment in the Armenian industrial
sector will take 3-5 years. Our calculations show that investment of the first
billion of EUR will bring 100-120 thsd job places, the second billion - 80-100
thsd, and the third one – even fewer. That is to say, on the bad forecast we
speak about 200-220 thsd job places with a good salary. It is impossible to
account more correctly. And if we take into consideration that one job place
feeds a family consisting of 4-5 persons, in that case we shall have 800 thsd-1
mln beneficiaries, that is to say, the number of our citizens working abroad
and sending transfers to the rest staying in Armenia.

 

In what fields may these direct investments be placed?   

 

The
President’s economists keep wondering what Armenia could export to Europe if it
joined the Deep and Comprehensive Free Trade Area. The actual purpose of DCFTA
was not to develop own production and to export something but to create
conditions that could encourage investors worldwide to move their productions
here. The matter especially concerns the businesses in the countries having
serious social problems, particularly, Spain Greece, Italy.

 

Our labor migrants pin big hopes on Armenia’s
Accession to the Eurasian Economic Union. Will the accession improve their working
and living conditions?  

 

I do
not think that Armenia's joining the EAEU may change anything in the matter of
the general attitude to the Armenians. 
However, this attitude has been worsening as from time to time the
Russian politician-"patriots" watch labor migrants as a factor that
hinders local residents to get a job. The great majority of migrants have been
working in a shadow sector of the Russian economy that belongs to the persons
close to the power who are allowed to do practically everything, just the same
way as in Armenia.

 

On October 10, the Agreement on
Armenia’s Accession to the Eurasian Economic Union was signed amid the
unprecedented toughening of the sanctions against Russia. How could you explain
this paradox? 

 

Perfectly
realizing the role of Russia and its potential in our region and at the
post-Soviet area, the politicians saying that Armenia should not join the
Eurasian Economic Union understand very well the possible consequences of such
a step for Armenia. Nevertheless, even in such conditions, in Minsk Serzh
Sargsyan should have demanded some time for Armenia to revise the opportunities
and risks of Armenia's joining the EAEU. Later it was necessary to declare
about the balanced using of DCFTA with the EU by Armenia, the available
potential of free trade with Russia and cooperation with the Eurasian Economic
Union being formed. All this might be done without damaging Armenia. Meanwhile,
today Armenia is practically the only country, which in the conditions of the
global consolidated position regarding Russia, stands next to Russia ex
cathedra. Taking into consideration the fact that all other calculations find
themselves in a deadlock, the reasons of such a behavior should be looked for in
Serzh Sargsyan's weakness and political poor judgment. The ruling party has
been simply looking for an opportunity of its staying in power at least for a
short-term prospect so that at the personal level not to have problems with the
leadership of Russia. At the state level I see no opportunity of Moscow to take
aggressive steps towards Armenia, as in all the spheres - military, political,
economic and energy, our country belongs to Russia.

 

You have mentioned that the DCFTA
would have created favorable conditions in Armenia for investing in the
economy. What is the obstacle for investments today?   

 

Investments are never made just for fun.
Even Armenia’s initialing the AA/DCFTA would not have attracted investments to
Armenia by itself. It is only a tool to attract investments and Armenia should
have used it. Free competition, normal administration, cheap labor force and
free access to the main consumer markets are needed for the potential investors
seeking to obtain profit. All this was implied in the DCFTA.       

 

So, is Serzh Sargsyan’s geopolitical
choice an obstacle for investments?  

 

Yes,
it certainly is. Of course, Sargsyan's economists keep persuading the people
that once they join the Customs Union, the whole world will rush to Armenia so
as to produce something here and to sell it all over the Eurasian Economic
Union. In reality, this market is very corrupt and not very rich. If you want
to sell something in Chelyabinsk or Yekaterinburg, you don't have to produce it
in a country that does not even have a common border with Russia, you can as
well do it in Chelyabinsk and Yekaterinburg.

 

A politician from Diaspora has
mentioned $500 bln when speaking of the aggregate capital of the Armenians
worldwide. What prevents the owners of that capital and the authorities of
Armenia from putting aside the empty rhetoric and investing at least 1% of that
capital in Armenia? 

 

First
of all, it is necessary to calculate which part of that capital is in the
pockets of the powers that be in Armenia (I think, no less than 10 bln USD) and
what part they have invested in Armenia. 
In the meantime, I see their investments in Belarus, Kazakhstan, Latvia,
France, and Los Angeles. I see what funds they spend abroad.  It is also a factor and our compatriots from
Diaspora also see that. The patriotism time of our compatriots and potential
investors has gone and today they look at the situation in Armenia more
soberly, i.e. from the viewpoint of the investment profitability. Once I
offered a well-known French concessionary company to consider projects of
construction of tunnels, flyovers and parking lots in Armenia. However, after a
preliminary study of the terms, the French came to the conclusion that their
entry to the Armenian market was inexpedient. In other words, Armenia, where
the concession is won by a foreign company that technologically lags behind the
Western countries, cannot have good concession projects, because corruption and
protectionism are observed here. If we also take into account the instability
of Armenia's integration preferences and the uncertainty of the economic
situation caused by the sanctions against Russia, it will finally become clear
that one should not expect big investments in Armenia in the near future.