– Mr. Bagratyan, in the end of 2008 you said that the economy of Armenia would fall rapidly in 2009, however the government forecast 9% growth in the budget of that year. Now the IMF forecasts 5% slump of the Armenian GDP, and even the Central Bank predicts that the GDP will fall by 5.8%. According to your opinion, why does the Armenian government say this now? Why did not they say it before?
– In the beginning the government did not expect that there would be such crisis. They are not good in analyzing situations. However they understood what was going to happen some time later.
– Did they understand things better?
– No, almost everyone in the government has businesses. They saw that their financial incomes were being cut down. This is what they could see. And they made a noise and understood that it was a bad thing and they were in crisis. By the way, sometimes they are more pessimistic now than the opposition. Now we see that they have less income.
– What do you think about the reduction of the Armenian GDP in 2009? Does the information provided by the statistical services reflect the reality?
– Probably the GDP will fall by 6,5-11 per cent. The information provided by the national statistics services does not reflect the real picture over eight years. There are a number of reasons why this information is not true. First, statistics is a tool for propaganda for the incumbent authorities. Since Robert Kocharyan’s tenure this institution does not work properly. You can find information about where and how they cheat in the previous publications of my interviews in the 168 Hours and Aravot newspapers. Second, the methodology of calculating the GDP was written in 1923. It means that this methodology is too old and does not work any more. In a word, in case of fast and quality reforms the correlation is about 3-5 per cent. However I think that this method does not take into account the social polarization of the society and exporting capacities. Plus, portfolio capital investments cannot be included in the DGP either (it is what they are doing now). The methodology of including the investment resulted from foreign transfers is disputable as well. It is not so difficult to guess that could publish this information due to this gap.
– How would you explain the fact that after several years of double-digit growth according to the IMF our country will be the only country in the region to have zero economic growth next year?
– This fact comes to prove what I said above. There has been no double digit growth. Now, when the factors of growth don’t exist any more, the statistical services cannot get the value of the GDP. Isn’t it strange that in 2009 the growth in Azerbaijan will be 2.5%, in Georgia – 1.2%, and in Armenia – 5,8% (according to the official information). It is also worth mentioning that it has been the IMF’s fault as well that the GDP real value was distorted. The representative of this institution in Armenia had to be someone more professional.
– What do you think about the government’s anti-crisis policy? Specifically, what do you think about the government’s initiative to provide construction companies with 20 billion dram credit guarantees against pledge and supporting them according to their business plans?
– The so-called anti-crisis policy of the government is their efforts to get money for their guys, to resist the exchange rate (so that the banks don’t suffer and people carry the heavy load), and providing 10 million dollar to the copper-molybdenum plant of Kajaran. There is nothing serious. As I said, their money inflow is less now and they are trying to compensate this money with the resources grabbed from the budget. A real anti-crisis policy would mean transformation to a policy of progressive income taxation, increasing the mid salary, revising the pensions and aids, as well as amending the shameful labor code adopted in 2005 (now in fact any employer can fire any employee without giving any justifications or explanation), amending the budget, etc.
– What do you think about the government’s taxation policy? There is a draft law, according to which the government wants to adopt an institute of discovering interests in order to prevent high rank officials from being involved in business activities. Thus, the taxation department will also have representatives in companies, the annual incomes of which exceed 4 billion dram. What can these initiatives give?
– It’s a stupidity and foolishness. First, we did not need any new laws. The 65th provision of the Constitution and other laws could be used for this purpose. This is what should be done. Every day you see MPs who proudly say that they are businessmen: Sargsyan, Alexanyan, Tsarukyan, Hayrapetyan, Vardanyan and others. Where is the Constitutional Court? Where is the prosecutor’s office? Did not they know that Robert Kocharyan’s sons were doing business to make their father rich? Second, this law will reach out the businesses, which have not made arrangements with the authorities. They will have permanent representatives in businesses, which are not representing their interests yet. This is a foolish idea. In developed countries such things are done for other purposes such as controlling the production waste. In such countries the tax officers accept and approve the real capacities of production waste to calculate the real capacity of the production. As you see, our law is not about this action. In addition, more than the half of Armenia’s GDP is produced by dozens of rich people. This group of rich people includes the authorities, namely the president, speaker of the parliament, prime-minister, ministers, MPs, prosecutors, judges and governors. Do you think they are adopting this law to fight against themselves? The sword of this law will be directed at another target but not themselves. The target is a group of several medium businesses, which are not controlled by them yet.
– Do you think the government will succeed in large projects such as the Iran-Armenia railway or the creation of a pan-Armenian bank? Can such projects resist the crisis?
– The plan of building the Iran-Armenia railway was worked out in the Soviet times. My government worked on that project as well. One day this project will come true. But I don’t think it may happen soon. It will not be economically beneficial but from the political aspect it has no alternative. The pan-Armenian bank is a foolish idea. If you want to make Armenia become a financial center in the region (for the first time this idea was brought up by our team in May 1992), you should develop the entire banking system. The pan-Armenian bank will not support the development of the banking system and will press down the trade banks and their role in the financial system of the country.
– According to the government, our banking system is stabile and has no problems. However, most of banks refuse to provide loans (even consumer loans), and even if they do they are giving loans in foreign currency. What does this mean? What is the situation in the banking system now?
– The banking system of Armenia, despite the fact that embezzled 782 million dollar from the reserves of the people in October 2008 – March 2009, is in a bad situation. In the first quarter of 2009 the income of all the banks was 917 million dram, but in the first quarter of 2008 it was 6,144 million, which means that the real income of banks reduced by seven times during one year. By the way, 9 banks out of the 22 ones had losses. This is the real picture.
– According to your opinion how long will the world crisis last? According to some estimations, the US will overcome the crisis in the end of this year. How much time do the post-soviet states need to turn to positive development again (Armenia, Russia, Ukraine)?
– I have spoken about it in my articles. If the loans provided to the American citizens in the end of 2008 are successfully returned till the fall, then in the fall the economy will start recovering. It means that in Russia this process of economic recovering will start in 3-9 months, which depends on the dynamics of oil prices. And in Armenia this process will start in 6-12 (compared to the US), which depends on oil prices as well.