Very often, you can hear such expressions as “if the factories operate, we will work” and more. There is no need to be surprised about the fact that especially middle and old age people are not particularly in favor of the developments in the country, especially hotel construction.
There is no need to blame those people. No matter how much the state claims that we live in a market economy and that it is their duty to revive factories, it is still the same- people don’t want to be in trade or services. They don’t want to go out of the house and pay the fees for internet and telephone connections.
Our authorities took the same strides as the economy. And our economy strode to the direction by which they turned the lathe factory into “Petak” fair. The productive factories turned into “Surmalu” and many others. And the corresponding ministry witnessed all these processes, changed its name from the Ministry of Industry to the Ministry of Trade and Economic Development. Nevertheless everyone knows that if we continue on this path we will turn into an agrarian economy that can hardly take care of its own needs. That is why there has been certain activity in the industry sector recently. We don’t mean to say that this development is totally supported by the state, however there is some form of aid.
The press conference held yesterday by Meruzhan Hakobyan, the Advisor to the Minister of Trade and Economic Development (MTED) was dedicated to this issue. Since the results of the survey of the RA National Statistic Service (NSS) 2005 are ready, we will present those figures in comparison with the results presented by the mentioned body.
Thus, according to NSS, the growth of industry in 2005 amounted to 7.5%. According to the MTED the growth was 8.6%. The difference is that the last percentage rate doesn’t concern the whole economy but to the companies under the control of the ministry.
The growth is not similar in various spheres of industry. There are sectors where the growth was significant; meanwhile in some other sectors there was even a slump. One of those sectors is the mining industry where there is 4.4% decrease. Hakobyan did not speak about mining, claiming that it is not his sector. Let’s just say that this sector is shady. This was what both the Minister of Environmental Protection and the Head of Tax Inspection said.
There is a decrease in the sector of car production as well. According to the NSS, it amounts to 11.4%. The ministry registered an 8.6% decrease in the production of 68 monitored companies. Let’s remember that in 2004, the number of operating enterprises rose by 33% and reached a total of 43.
The situation is even worse in the sectors of light industries. Compared to the previous year, the production of 19 monitored enterprises amounted to 78.6%. Let’s mention two branches where the decrease is most obvious. Compared to 2004 the volumes of textiles production amounted to 74.8% and the volumes of texture and fur productions and the import levels increased by 72.3% (according to NSS).
The same picture is in the wood production sector. Based on the results of the NSS, this industry went down to16.2% and, according to the MTED, it amounted to 18.8% (for four operating companies).
We will focus on the reasons a bit later but before that, let’s mention that the 7.5% growth of industry mainly originated thanks to the sector of chemical production. The specialists in statistics have registered 57.1% growth here. Mr. Hakobyan mainly connects this growth with “Nairit Factory” CJSC, which compared to the pervious year, grew by 201.2%. There was over 30% growth registered in the production of rubber and plastics as well as metal production.
Now let’s speak about those sectors that lag behind.
Hakobyan mentioned that light industry is very important for our country, “it takes a lot of work but meanwhile it needs less power and materials.” Why is this field in such a poor condition? The specialists of the MTED have an explanation for that, “based on monetary exchange rates the decrease is mainly a consequence of the valuation of the AMD in terms of the current contracts.” Let’s take a closer look. The majority of our companies in the light industry sector operate on the basis of international orders and it is clear that foreigners do their calculations
based on international currency, not AMD. For example, if at the moment of signing the contract one USD costs 480 AMD, when the AMD is evaluatedn (one USD is 440 AMD) the company doesn’t receive 480 million AMD but, rather 440 million AMD. Of course there is no change in volumes, but since our country’s legislation demands to sell products with AMD, this means that the income of the companies reduces. This situation is characteristic for enterprises exporting their products.
So what is the interesting thing here? The interesting thing is that the President of the Central Bank (CB), Tigran Sargisyan, has promised us that the valuation of AMD would not negatively influence the economy. However, every person who at least understands a little of economics knows that the valuation of state currency negatively affects local production. Sargisyan revealed another interesting thing: he said that the valuation would even be useful for our country’s internal economy. He said that our businessmen would by mechanical-devices at a cheaper price. Mr. Hakobyan didn’t agree with this assumption, saying that devices are bought only once every few years, while in the event of valuation, the price of inner resources rises, and our production becomes non-competitive.
There was also a question about what would happen if the gas price goes up. And this time again, the CB and MTED differed in opinion. If you remember Sargisyan announced that they are not very worried about the increase in the gas price, and that certain measures will be taken to prevent that. If we take Hakobyan’s word for it, it becomes clear that the new gas prices will have negative consequences. It will especially have a negative influence on energy production and as a result, we will have inflation. According to the ministry, prices will go up by 20-22%. It is interesting to know whether the CB has thought about this before announcing that only a 3% price increase is expected in 2006.
At the end the advisor to the Minister of Trade and Economic Development, Hakobyan, added that there is no need to keep saying that our market is small. The industry is simply very hard to manage and many people want to invest their money in other sectors. The advisor thinks that it is worth amending the legislation by giving enterprises certain tax privileges.