– Are businessmen, small and medium businesses protected in Armenia?
– Generally the interests of employers are abused in all sectors of Armenia, especially in small and medium businesses. Let’s start our discussion from the labor code. There are few provisions in this law aimed at protection of employers’ rights; it seems this law is written for employees but not managers. But many managers that execute agreements with employees are not the owners of businesses and they are hired to work too, thus they need to be protected as well. For example, an employee has the right to inform the employer in advance and resign. However, the employer hires the employee and spends resources for helping them to adapt during the first 3-4 months. It means that the employer is both paying and teaching. But later the employer may resign and say that he/she has found a better job. The law does not enable employers to charge the employees for the knowledge taught. The employer may use the provision on lack of trust toward the employee and say that he/she has discovered commercial information or done another action and fire the employee at once. In difference with other countries, in Armenia the principles of loyalty and confidentiality of commercial information is at a very low level. You are hiring someone and telling him that he/she should not tell anybody about the affairs of the company, but this guy may share this information with his family and friends without knowing the possible results. Or, an employee may resign and by using this information work for another company of the same sector for more money. The former employer may not prohibit such employees work for a company of the same sector during the next 1-2 years like in the US and European countries.
– Indeed employers fire people very often, don’t they?
– If the employees are not registered they may. The working hour starts at 9a.m. and many of them are late, drink coffee, spend more time on lunch and talk to the other people. This prevents the productivity of work. Analysis shows that American workers provide as much efficiency during 3-4 days as our workers during one month. The next problem is that employers are told to create adequate conditions for work. It is very hard to provide these conditions for a small business owner and they do it on the account of their private financial resources. In order to provide normal productivity businesses need several years to grow. The competition and business environment are not normal in Armenia and businesses may work for several months and close down because of small problems.
– You are suggesting to raise these requirements for good working conditions, aren’t you?
– No, the conditions should stay. But in developed countries there are foundations for this purpose. Or, if you are investing in such business, the state gives you taxation holidays because you need time and resources to develop your business. We have inherited old facilities from the soviet and workers are not working with good productivity to the extent of being able to replace these old facilities. They are spending their money on improving the institutional capacity for the purpose of raising the productivity. Or, they don’t pay taxes. I know a lot of businesses that did not pay taxes during the first several years. They did not pay taxes, saved money, and now are working properly. If businesses don’t have supporters, they cannot develop much because if they develop, they will be visible and will have to work in transparent conditions. They can work illegally only if they are backed by government officials. That is the reason there is a big problem of competition in this country. All the developed countries have passed through this path and the CIS countries are on the same way too. In other words, the generation will change and new people will come who will be able to work normally. Many businessmen started their career with bad biography but now they are taking care of the education of their kids. As a citizen of this country I wish these reforms take place fast and for this purpose the legislation should be improved. We should start this process now from kindergartens and schools in order to have a civilized environment in the future.
– What is being done for fast development?
– We praised the government’s decision of defining a limit of 70 million dram circulation and 20 inspections were stopped. They allowed small businesses breathe easily. Before that annually businesses would spend 1000 hours on paperwork, now it is easier and in 2010-2012 we will use electronic reporting and stamps will not be used anymore. But even if it is done they should be honest and not say that there is no money in the budget and they should give a penalty to charge. Most of employers don’t want to apply to court to solve such problems because it takes much time from them. Even if they win the court cases, the controlling body writes a paper and submits the case to the secondary court instance. As a result employers prefer to pay this illegal penalty rather than apply to court. This is what I mean when I say that employers are not protected.
– Don’t you think that we are not moving through the path of evolution?
– Yes, unfortunately we are not moving toward that direction yet.
– Once you said that there is no medium business in Armenia.
– Small businesses have 5-10, or maybe 20-30 employees, the bigger ones have 100-200 employees, and those that have more are considered to be big businesses. Now some mechanisms are being established to classify the businesses according to the money circulation and other parameters to calculate the level of productivity. If they do this, there will be medium businesses. Currently there are about 125 thousand companies in the country, most of which don’t work and there are only about 2000 companies that work properly. Those companies that don’t work don’t dissolve because it is about bureaucratic problems, thus they prefer submit reports rather than dissolve. If they don’t dissolve, they don’t use the property either and their assets are frozen. Now we recommend to view this process as a policy of reviving companies. These people will not pay their debts any way and it would be better to tell the companies that have for example 10 million debts to cover one million and tell them that the state does not want the rest of the money. This may help to take these frozen assets and use in other businesses. Denmark, which population is about 5,5 million, has 110 thousand companies and the budget reaches 150 billion dollars. The population of our country is 3 million, the budget is about 2,5-3 billion, and it has 125 thousand companies. We don’t need so many companies in vain. By the way, the union of employers unites about 1000 companies, 30% out of which are big companies and they pay 75% of the taxes paid to the budget.