– Mr. Sandoyan, how do you estimate the current state of Armenia’s economy?
– The economic growth is a very important factor for the development of society but it’s not sufficient. Even if for a certain period of time we were leading the world list of countries with economic growth and prior to the crisis we were the second it still doesn’t mean much. There is the understanding of quality of economic growth, equal distribution of wealth and economic growth. So in this regard the economic growth didn’t give us anything. We don’t have either high technologies or economy based in science and we didn’t have any success in equal distribution of wealth. As a matter of fact if we judge from the qualitative lifestyle of people we will see that during these 5-6 years we rolled back even further. If some phenomenon, which make look profitable at first sight but didn’t cause improvement of quality of lifestyle then it is assessed in a wrong way or we misinterpret that. There is the index of balance of consumption (IBC), which shows what a dollar can buy in different countries. According to the WB calculations in Armenia the IBC was 3.7 nearly 5-6 years ago. So in our country 1 dollar was 3.7 IBC. Now in my opinion the IBC reached 1.7-1.8 but the official index is 2. So this means that the life has become more expensive 1.8 times. But does this mean that the incomes of the population rose respectively? No. Moreover, due to the AMD revaluation we have lost a number of important branches of economy – diamond processing, light industry and other branches of industry and this cause the regress of high-techs in the country as well.
– Do you see any perils in the growth of our foreign debt?
– It is accepted to say that the 50% or 70% of foreign trade in relation to the GDP is not very dangerous but I don’t think so. We will soon approach 45%. Of course, it was necessary to take those loans to cover the budget deficit. But I am not sure that these great loans will be used efficiently. We have had many phenomena like this. For example the refinancing of the banking system conduced to the development of banks. But on the other hand this covered effect had an extremely negative impact and in fact our financial institutions didn’t develop. I am afraid that this will be the first negative influence. The second genitive thing is that no matter how much financial recourse you inject in the economy like Russia’s there will be no results. Such injections may cause deflection both in the consumption market and the competition sector and may just turn out to be meaningless. I cannot understand what’s the point of financing incomplete construction, which turned out to be one of the basic reasons of economic turmoil in the country. Or let’s say some enterprise with 15 staffers in charge of tea production is supported by the government with not just loans but by participating in its capital. I don’t understand this. I think that the several hundreds of thousands of dollars could be more effectively invested in education, science or the social sector by supporting the growth of demand. The government can let itself become a co-owner to enterprises, which are created by the system. So this kind of participation is not admissible to me. Even the best governments can be the worst managers. There is no case that this wouldn’t create corruption risks, waste of state means, etc. And when the government is becoming a grantor of loans we should relate o this only with humor because here there are no specialists, who would estimate the risks of credits. The provision of bank guarantees is also unacceptable. In this aspect the banks don’t have any risks and are pretty calm to decision-making. And if the government makes the wrong choice in terms of enterprises and those fail to fulfill their obligations then our generations will have to pay back for the mistakes of the government. We have already had such situation in Armenia in the 90s. We have great loss of loans in the agriculture, energy and other sectors. Besides that, these anti-crisis measures in Armenia and the former Soviet Union have a purpose to soften and somehow saving the situation. Even during the hearing of the Budget it becomes obvious. Let’s say an objective is set to provide 1-2% economic growth in order to provide the level of expenditures of 2009 and many other objectives, which do not have any qualitative purposes. Here there is the trick of the stunts. They announce that we didn’t sequester but the government refuses a range of expenditures by not complying with the requirements of the law on the budget. Sequestering would be fairer. This would help the market and other subjects realize that this or that expense will not be fulfilled. Besides that the government itself determined the priority of expenses. This should have been done by the legislative. In short, for 18 years now we have been trying to approach the formation of the new state budget for the solution of only trivial issues by not thinking of more strategic and fundamental issues.
– Why did the economic slump of Armenia compared to other countries reached greater extent during the past 1-1.5 years?
– The Armenian crisis is not auxiliary to the global crisis. It has started from the first day of Armenia’s independence. We take the wrong way with right methods or sometimes the right way with wrong methods. Philosophically speaking, if back in 1991 we were too far from the market economy then we are even further now. We don’t have the right institutions of parties. The impression is that the humiliation of social justice is taking place in the scales of centralized state policy. The so called oligarchs are totally linked with the government. They receive certain privileges and quotas from the state to run their businesses in a more favorable tax environment. These processes were in front of our eyes in 1991-2009. And it is not fair that the current opposition is saying that during their power everything was wonderful and that everything is so much worse now. And the government is also wrong to blame the opposition of the bad past and wonderful present. In the conditions of absence of political parties a government cannot be formed with party principles. By this we seriously hit our sovereignty because all this is just imitation, a game. In that case, let’s form the chess team with the same logic – 3 people, 3 from the RPA and 2 from the Prosperous Armenia, one from the Legal State and one from the ARF as a reserve player. Isn’t this ridiculous? Bu who says that the role of the RA government is less important for us than of the chess team? I am sorry that the prime minister by being a professional economist doesn’t have the team of the right specialists, who can solve the issues, which the prime minister brings up from time to time. He often raises the issues, which already exist and offers the solutions, which are necessary. But I don’t believe that it is possible to do because there is no team of professionals. Thus the first issue is the quality of our governmental cabinet. If you were planning to make Armenia a regional financial center you should have done so. Yes, this is perhaps the best option for the current circumstances but these are only lofty statements. The next issue is that the importers are monopolists. They have already occupied the political field and the economy. And the state is serving their interests. The next one is the issue of using the potential of the Diaspora. We were not able to use the Diaspora Armenians as providers of our goods and services in the world and attract providers from abroad as the Chinese do. We were not able to create an environment, which would make the Diaspora Armenians treat Armenia not only emotionally as a fatherland but practically as well.
– Let’s assume that the internal issues, which you have mentioned, are solved. Can Armenia become a normal state?
– We are approaching the most painful question – NRK conflict and regional blockade. Let us assume that the NKR conflict is resolved within several months, Armenian-Turkish relations are normalized and even Lars corridor and Abkhazian railroad are opened. We will appear in a new situation. In this case, I think that the issues which I have mentioned will be automatically resolved. If during these 18 years the issues with monopolies and oligarchs were solved, the potential of the Diaspora was used we would definitely be in an incomparably better shape than today. But this wouldn’t bring us the best results because besides information technologies and financial system, certain ways are necessary for the development of the rest of the branches of economy. We are not interesting to potential investors because the RA market is very small and the other markets are closed.
– What will the opening of the Armenian-Turkish border give to us?
– this is the factor, which will have a positive influence on all the other factors that I have mentioned above. Somebody from Italy may think of investing in Armenia because of the open border. Let us take any sector. Let’s take monopolized importation of certain goods by 100% – sugar, flour, gasoline, not to mention even the more serious sectors. There will definitely e diversification of players. Why? Many people are saying that today the oligarchs have occupied the whole market and not only – the customs services and nobody else has the chance to be included in the importation of certain goods. I agree that it’s like that but it won’t be so if transnational corporations were involved. If some big transnational corporation in charge of flour business appears who can block them? We have had the HSBC bank in our market for 14 years now. Why couldn’t any local minister, policeman or statesman have the power to influence on them or try to hinder their business? Roughly said, the HSBC is more powerful than Armenia. Now try to imagine such companies in various sectors – Orange Pernod Ricard and others. And they are arriving with a different culture and management and their relations totally differ from brining somebody or supporting somebody corrupt during elections for common good. This will create great opportunities for the economy, the black market will reduce; there will be healthier competition, etc. The practice shows that a part of our issues are auxiliary to covertness.