Samvel Avagyan

New mandatory pension system also needs work, says World Bank report

A new report by the World Bank entitled “Armenia: Accumulation, Competition, and Connectivity” is a mixture of good and bad news for the country’s economy.

On the positive side it states: By 2013, the Armenian economy has left behind most of the hangover from the global financial crisis and a look at medium- to long-term growth drivers is therefore in order. 

On the downside, of the 30 of the market sectors examined in the report, 8 were "monopolized" by only one firm.  

Another six sectors were in the hands only had a few firms.

In this regard, the report states:

"Indicators for Armenia of the intensity of local market competition, the extent of market dominance, and the effectiveness of competition policy therefore lag behind other countries in the region. According to the Global Competitiveness Index (GCI), Armenia ranks lowest among ECA (Europe and Central Asia) countries in the effectiveness of anti-monopoly policy and the intensity of competition. This low ranking goes a long way to explain the lack of dynamism of the Armenian economy, which leads to low employment and low incomes." 

Armenia even outranks Kyrgyzstan (16%) in terms of monopolized domestic market share.

According to the report, less than six companies control 60% of the markets in Armenia. 

The report includes the following interesting paragraph regarding the mandatory individual pension system due to take effect as of January 1; a measure that has incited a number of street protests in Yerevan.

"Financial market development will likely receive a significant boost from the inflow of funds expected from the new mandatory individual pension accounts. Investible resources are projected to rise to nearly $2 billion by 2020, a significant sum for Armenia, where total banking assets in 2010 were about $6 billion. The new pension accounts provide tremendous opportunities, but the government and the CBA (Central Bank of Armenia) still have to design rules and regulations and the financial infrastrutre to make them a success."

It would seem that there are still unanswered questions as to the efficiacy of the government sponsored pension system.