An interview with former RA Prime Minister Hrant Bagratyan How would you evaluate 2010 from an economic perspective? I can’t to any economic successes in the year overall. The same basic problems existed at the start and end of the year. The number one issue remained the distribution of capital, which was highly centralized.

The statistics from the first ten months show that the contribution of the biggest taxpayers decreased, even though the prime minster and other government officials argue otherwise. Secondly, the estimated 1.5% inflation rate, plus or minus 4, wound up being more like 8.5-9%. This cannot be considered a success. Thirdly, the price increases of gas and electric utilities made the economy uncompetitive overall. If there was a bit of exports, it was only in the exportation of mining products, since the government exacted no rents. Thus, people were able to export to a small degree, even though the world prices of copper and molybdenum rose sharply. Also, if we look at budget revenues, there was no success at restoring real 2007 levels; ruling out inflation. Yes, budget revenues rose by 15-20%, but we must take into account that inflation was high, that the tax threshold rose during the year because many omissions were removed. When I mathematically neutralize their impact, I then see that a smaller budget was collected than in 20007. The fifth point was that the government, including the Central Bank, couldn’t manage or understand how to deal with the foreign exchange market. It is artificially inflating. The entire world regards 2010 as a year of war for foreign currencies since, entering the International Trade Organization; people can no longer manage foreign trade by customs duties and are trying to use foreign currencies as a replacement tool. We did the complete opposite. There is no basis or logic that we can use to call all this a success. Let’s look at the GDP numbers – it might comprise 2%. I have repeatedly stated that given current conditions, the GDP numbers describe nothing. The number can also be inflated by adding GDP power consumption or capitalization. In the best case scenario, this faulty statistic in Armenia is 2%; 4.8% in the rest of the world. In 2009, the figure was 14.4% in Armenia and 2% globally. In other words, the average development rates in Armenia and globally are growing apart. Fifteen years ago, the situation was very bad. Everyone was complaining. In terms of per capita GDP, Armenia’s world ranking was in the 75th to 90th spot. Back then, people were protesting that we had taken the country down to the level of Africa. Today, we have slid further still. In 2009, Armenia was in 118th place; today, 125th. 45 of Africa’s 58 nations lag behind us, including a few Asian nations like Bangladesh, Nepal and Afghanistan and one or two in South America. It’s a total fiasco and it seems we have no shame to boast that at least we can compete with the likes of Mozambique. This refers to all the statistics and it troubles me. We have to regard this year, just like 2009 and 2008, as a year of missed opportunities; a year of continued retreat. What should the government have done, but didn’t? The government must take specific steps like a progressive tax structure. So far, it hasn’t. It must divvy up the economy according to sectors and state that it will not permit any one enterprise to have more than, say, $100 million in sales in any one sector. Otherwise, it will raise the 25% income tax to 75% or even 95%. It should have taken steps to combat powerful economic interests. It’s these 10-15 oligarchs that are messing things up in the country. They will never create any positive future for Armenia. The government should have defined prices for the sale of mines. They can’t privatize mines also, can they? Such small steps would have added $1 billion. Then, the government could have easily raised pensions from $50 to $80 and the average government salary to around 350,000 – 370,000 AMD. I would do it in ten days. While I’m no socialist, I am strongly opposed to such income extremes. I frequently raise the topic of “untamed” liberalism and say that the authorities are the true “untamed” liberalists. The government constantly talks about the need to diversify but doesn’t understand that in order to do so there must be 10,000 individual enterprises instead of the current 10 and that capital must also be decentralized. It just can’t be tolerated that someone has $3.5-4 billion when the overall GDP is $11 billion. This is the result of the wrong government in power. I won’t even bring up the fact that all of this is stolen goods. If you are in the government’s “good graces”, you can become a millionaire here in Armenia. Furthermore, whatever actions the government took came out wrong in the end. Just look at the cash register receipt program. The government wants us all to present a receipt. But just go to any Mika gas station and request a receipt. You’ll be lucky to drive away without getting beat-up. Do you think the government isn’t aware of what’s going on?  If that’s the case, those officials can be regarded as clowns. Do they want us to demand a cash receipt from the old women selling vegetables on the street corner? We have never seen the government actually following up on any of its schemes. Let’s talk about this auto insurance thing. This isn’t insurance but a mandatory tax. They didn’t have enough sense to go to the internet and see the problems created in Russia and how they coped. They chose to adopt the most outmoded of all Russian options. There are simple means available to achieve all this with the minimum of problems. But it was so quickly pushed through and in so crude a form, that I really believe the government was afraid to waste any time, less they soon find themselves no longer in power. Thus, their dictum – let’s amass as much as we can before it’s too late.” I can’t believe that the government or the president don’t want things to improve. When it comes to the president, in particular, the government doesn’t even understand who is good or bad. The entire government staff has been taken aback by the measures enacted by Prime Minster Tigran Sargsyan and is frustrated that there is no serious thinking going on. As I said, I don’t really think that the president or even the MP’s in the parliament don’t want the best for the country. This is what really gets me down. (Hrant Bagratyan served as Armenia’s Prime Minister from February 1993 till November 1996. He served as the RA Minister of Economics twice and holds a PhD in Economics.)