Famous Armenian economist Abel Aghanbegyan is currently in Armenia. Yesterday he was participating in the festival of the Supreme School of Corporative Management of Armenia. This school, which grants an MBA degree, closely cooperates with the Russian Federation Economy Academy, the economy and policy department of which is headed by Abel Aghanbegyan. The 78-year-old professor has also found time to transmit his knowledge to Armenians and right after the festival he was going to go to a lecture. Nevertheless, we were able to ask him a few questions. When we approached him Abel Aghanbegyan was already talking to someone present at the event about the situation of the Armenian economy. He was speaking about the monopolies and their negative impact on the economy. “In Armenia the industry hasn’t grown more than 5% during the past 10 years. The reason of that is monopolization because monopolies don’t need industry,” he said. He mentioned that monopolization mainly relates to importation because the most of the money can be made due to importation. According to the renowned economist, such a level of monopolization is extremely dangerous because it hinders the industrial development. Aghanbegyan also spoke about the policy of the Central Bank of Armenia, which is so much lauded by the RA government. “The policy, which the CB was implementing in relation to the AMD before the crisis I think is extremely dangerous for the Armenian economy. As the AMD was evidently over-valued it caused the unprofitability of industrial development. Whole sectors of economies were as a result ousted from Armenia. Diamond processing was quite developed in Armenia. Armenia could have developed to become a country famous with diamond processing and jewelry production. Armenia had all the prerequisites for that. They even wanted to open a diamond stock market in Armenia. But it didn’t happen due to the AMD revaluation,” stated the academician by adding that it’s necessary to conduct a policy, which would be profitable for both the importer and exporter. And it’s also necessary to substitute the foreign production with domestic production. “When importation exceeds exportation a negative somersault is created. And the remittances don’t cover even half of this deficit. That is the reason why at the end of final summarizing calculations Armenia is having a negative balance. Ultimately importation creates the increase of debt. The debt of Armenia already amounts to 40% of Armenia’s GDP and that is already dangerous. And if it rises a little bit it may become critical. This is another loophole of the economy,” stated Aghanbegyan.
– Why are the issues mentioned by you, monopolies, monetary policy, not solved in Armenia? Isn’t the knowledge enough? Is there no political will or are there any other reasons?
– It is difficult to answer this question in a concrete way. Maybe they don’t wish to hurt the people, who are in charge of importation. Or perhaps they don’t fully understand the negative consequences and impact of such a policy. The industry is practically annihilating.
– The government currently claims the opposite. They say that after the crisis our economy has diversified, the ratio of industry has increased. Indeed this mainly happened due to the slump of construction rates.
– Yes, the construction has not rehabilitating. It is plummeting just like in the past and it’s very bad. What is here to brag about? Industry really grew in 2010. But this also happened at the expense of mining or more accurately to say at the expense of the increase of the international price of metals. But it’s not internal growth.
– How do you estimate the work of international financial structures? For example, the IMF and the World Bank. Our authorities very much signify the opinion of these structures. In the meantime many people in Armenia think that instead of trying to develop the Armenian economy these structures are trying to keep in their dependence the Armenian economy.
– No, this is a common accusation, which is often addressed to these organizations. Why would they want to keep the Armenian economy in their dependence? What is the benefit of the World Bank from Armenia? It is even ridiculous to think about that. They implement similar policies everywhere and provide credits, loans, implement projects. They are doing useful things and serious experts work here.
– In Armenia they also criticize the strong positions of the Russian capital here. Almost everything is controlled by the Russians, starting from the energy sector, ending with transport and communication. Doesn’t this contain certain hazards?
– Let us start from the point as to why the communication sector belongs to Russian capital. Because it is more profitable for the Armenian side that the Russians are investing here. Same can be said about the railroads. The Russians are trying to refresh the train cars, restore the rails and make further investments. In terms of gas everything is much more logical. If Armenian had gas and Russia bought it we’d have the same picture. And in this case it’s clear that the gas sector is controlled by the Russians. Armenia benefits from this cooperation with Russia as ultimately all that is in the territory of Armenia. The same can be said about Russia. All the giants of auto industry are building factories in Russia. If Russia was able to build a factory itself it would do so. But the Russian side neither has money, nor personnel and technical equipment. And where are these factories built? In Russia indeed. Who are the cars for? For the Russians of course. Who work in those factories? Russians do. Of course, it is not the Russian Lada brand but Toyota and Honda. So there is nothing bad about that.
– Has our government asked for your help in order to receive some advice?
– You should ask this them not me. At any rate, my suggestions were positively accepted here. I haven’t seen any sign of ignoring my opinions by any of the top officials. I had the opportunity to meet with almost all the representatives of the economic block, observe elections and organize discussions. I mean I had the opportunity to examine the situation. It turned out when I released my report in 2008 right after that the crisis started. And indeed during the crisis the government couldn’t be occupied by future prospects and instead should have annihilated the consequences of the crisis (so it did that way). So I am not going to criticize or blame anyone. Let’s see what will happen later. The economy comes and goes but economies remain.
– However, the RA government doesn’t always take care of the consequences of the crisis. For example, they are speaking about very ambitious projects to turn Armenia a financial center, center for tourism, etc. And by consolidating the potential of the Armenian Diaspora the government wants to occupy its worthy place in the world economy. To what extent do you think these projects are realistic?
– Indeed, we should try to reach all this. For example, Moscow is trying to become a financial center as well. Presently it occupies the 70th place in the world as a financial center. Is it bad that they are striving to become a financial center? Of course not. But if you are not doing anything nothing is going to work out. In Moscow they wish so and do so. And they are moving in the right direction. It is another question whether they will reach their goal or not. The same can be said about Armenia. People are trying to consolidate the Armenians of the world. Nothing is wrong with that. And any step in that direction should be positive. Indeed, it’s worth cooperating with the Diaspora. Armenians should consolidate their powers just like how the Jews are consolidated around Israel. At any rate, the worst thing is to sit with the hands crossed.