During the Soviet times gold production wasn’t state monopoly. Jewelers
made jewelry in their houses but in small quantities. In any case
people used to ask these jewelers to melt the gold again. But since
people used to get a higher salary back then, gold remelting wasn’t
widespread and people mostly bought factory jewelry.
After the collapse of the Soviet Union, this field was left out in the
middle of nowhere just like other fields in the country. The government
wasn’t involved in this production field any more. The state-owned
jewelry factories were privatized. Some jewelers, who used to work
illegally before that, founded private enterprises, thus legalized
their activities. If in other fields the government can compile
information about the participants’ activities and tax them the
situation is different in this field. Market economy has created chaos
in the jewelry field, and the consumers are suspicious of the jewelry
they buy.
Nowadays we are suspicious of the price and quality when buying
jewelry. And often the reason for this are the consumers, because they
ask the sellers to write a higher price on the label to show that the
present they’ve bought is more expensive than the real price.
From the point of view of quality, jewelry markets are not supervised.
The situation is better in shops, especially in those where they sell
jewelry imported from abroad. But the prices are higher in these shops.
Since people living in Armenia do not receive a high salary, they
usually buy jewelry from markets. In case someone is suspicious of the
quality of jewelry when buying it in the market, the sellers ask them
to check the quality. The “local specialists” ask for 500 dram for the
probe and 200 dram for weighing and they always approve the information
of the seller. After buying jewelry, consumers leave the market happy,
being sure they have bought high quality jewelry. Almost all the
consumers check-up on the jewelry they want to buy. It turns out that
this process is just another way to charge people more money. Actually
the legislation of this field is very deficient.
In the Soviet times jewelry quality control was carried out by the
“precious metal control department” of the Ministry of Finance and
Economy.
“We take the production of “Yerevan Jewelry Plant-1” to that
department, they approve the jewelry in their laboratory and then put
the relative mark on it”,- says the “Jewelers’ association” PR manager
Volodia Kirakosyan. The vice of the head of the control department Mr.
Vazgen Martirosyan says, that only big companies apply to them. “There
are only 10-15 companies applying to our department. We don’t visit the
markets, because the legislation is deficient in this field and it is
not defined what we must do after registering violations. There is no
control here. At the present we work according to the decisions made by
the government of the 50s, which are deficient and often don’t
correspond to modern day standards”.
“There are more shadow producers among the jewelers than legal
ones”,-says the head of the “Jewelers’ association” Emil Grigoryan.
As a rule, private enterprises and those, who produce in small
quantities, don’t apply to the “control department”. Their consumers
have to rely on the conscience of sellers’ and those who cupel for 500
dram. But the economy doesn’t develop on the base of conscience, but
rather on the base of law and good work done by state bodies. The fact,
that the gold market is not controlled, mostly is not by chance or
because they cannot do it. After all, gold is a strategic metal as
well. This uncontrollable situation was probably caused on purpose.
I.e. there is a group of people who is interested in creating such a
situation. They carry out their activities both in the private sector
and state bodies and get a good profit out of it. It doesn’t matter for
them if the field or the Armenian economy doesn’t develop.
The head of the jewelers’ association Emil Grigoryan says that the
field doesn’t develop because of VAT as well. Diamond production is
free of VAT. The evidence for this can be seen by the increase in
capacity of diamond production. Our state officers and statisticians
appreciated this fact so much, that they started to calculate and
compare the economic development with the diamond production
development rate and without it. According to Mr. Grigoryan they should
apply this principle on gold too.
“VAT is not good for jewelry production: VAT should be taxed from our
work, but it is taxed from the total price. If in other fields 50-60 %
of the price is the money for the job completed, and only 25-30 % is
the money for raw materials, in jewelry production about 80-90 % of the
product price is the price for materials, and only 10-20 % is the money
for work done. But they tax the total price, which is more than the
work that we complete. We have to keep 18 % from the 15-20% in order to
have a profit of 3 % from the total sum. We import the materials from
abroad. How can we keep 18 % profit from the money for the job being
done? Last year a new tax was applied: 1 % as profit tax. Our profit
doesn’t exceed 2-3 %. How can we pay 1 % tax beforehand?”- says Mr.
Grigoryan.
By the way, the“Jewelry plant -1” fills the 280th place among the
biggest tax-payers and paid 21,5 million dram tax in the first six
months of this year.
The machines and tools they import are expensive, and this prevents
further development too. Most of these tools are not produced here.
Since jewelry is not included in the list of consumer goods, tools are
expensive in a lot of countries. This is their right, but we should
think of our jewelry production development ourselves. According to
experts, Armenian jewelry production is the most expensive in the
world, because only the labor force is local. There are a couple of
companies producing several types of tools in Armenia, but in small
quantities.
“First of all, there isn’t enough money to produce, advertise and
export our products. Besides, we can’t borrow money, because the
interest rates are high. There are no clients either. Jewelers mostly
buy imported tools”,-says the representative of “Shaber” company, Armen
Mikayelyan.
They usually import German and Italian tools from Turkey. Ali Cholakyan
imports tools in Armenia, he doesn’t come to Armenia often, but he has
clients here. He sells tools in Turkey too and offers Armenian tools as
well.
“Armenian tools are cheaper and the quality is better. We should let them develop. Each side will have profits”,-says Ali.
“The field can’t develop well only by private cooperation, and the
government plays a very important role here because it is the one that
controls the field”,-says Armen Mikayelyan.
In autumn the National Assembly will discuss and adopt a new law for
jewelry production and the law will be applied in order to regulate the
situation in this field. And it is not clear yet what kind of influence
it will have on the development of the field and its legitimiacy
P.S. Several years ago the “Yerevan Jewelry factory” was divided
in two parts. We asked the factory’s former director Emil Grigoryan to
inform us about this.
“We had to find a good solution when the factory was in crisis in 1997.
We worked out a program together with the government and passed its
“Active part” management to a good business group, which could revive
the factory and start production within a couple of years. This is the
“Jewelry plant -1”, which was privatized. The share holders are
Russian, German and local companies. This company has 1450 share
holders, 1400 of which are local people and the rest are foreigners.
The previous company, which is called “Jewellery plant-0” now, has
small production. The engineering and marketing departments are there.
This company is going to be privatized with the same proportion. These
two companies are in consumer-producer relationship”,-said Mr
Grigoryan.
Mr Grigoryan is a share holder in both of these two companies, but he didn’t inform how much of the share-holding he owned.