Armenian citizens are called to be patient to the oligarchy's greed

Armenian citizens are called to be patient to the oligarchy's greed

During this week, the Armenian media discussed and wrote a lot about the plastic rice, poisonous canned food, donkey and horse meat discovered in the shops and sales outlets. The pre-holiday price increases have focused consumers’ attention on the market and became a major topic for publications. For example, the Haykakan Zhamanak newspaper writes: "The topic of price increase in Armenia has recently achieved a comical scale. The rise in price of a number of goods, according to the prominent representatives of the ruling party, does not harm the poor, because they still do not buy these goods and eat only bread and potatoes, while the government and the central bank claim that, of course, some goods have risen in price, but some have fallen in price, and as a result, a very low overall price growth rate has been obtained.’’

However, the thoughts of several prominent economists expressed recently, stirred the representatives of the Armenian economic society, although the campaign for abolishing the economic illiteracy held by Armenian President Serzh Sargsyan for Armenian farmers has remained somehow unnoticed. The question is about his lengthy speech at a conference in Dilijan dedicated to the local and territorial governments. Few people noticed, but in his speech, Serge Sargsyan touched upon the pricing policy for apricots, grown by farmers.

”Suppliers come to harvest, people first say one price, then when they see the harvest, they call another price. This approach is incomprehensible. The producer must evaluate the profit he expects to get, rather than look at the price at which this product is sold in Moscow ... So, if my apricots cost AMD 400, and it is profitable for me, I should not care that these apricots are sold for $ 10 in Moscow, "he said in his speech, the newspaper writes.

That's right. According to the classical economy, there is no mistake. But ... There is one big and fat ‘but’ here. Does this pricing mechanism set by Serzh Sargsyan function for his confidant oligarchs? When combining the words ‘Serzh Sargsyan’, ‘confidant’, ‘oligarch’, Samvel Alexanyan, associated with the sugar monopoly, appears right in front of the eye.

And now let's see how the approaches presented by Serzh Sargsyan are close to Samvel Alexanyan.

"Starting in mid-2016, the sugar prices in Armenia rose from AMD 355-360 in February-March to AMD 400 by the end of the year. This was explained by the fact that the sugar prices had risen on the international market. The prices did rise, but it could not influence the price of the product imported by Samvel Aleksanyan, or, as he claims, the price for the sugar raw material. According to the data published by the State Revenue Committee of Armenia, in 2015 the customs value of 1 kg of the imported sugar was $ 0.40, and in 2016 - $ 0.37. In other words, despite the price increase on the international market, Alexanyan paid for the imported sugar almost 7.5% less. However, on the domestic market, the sugar price increased by 12.5%,’’ the newspaper writes.

How does this fit into the logic of Serzh Sargsyan’s campaign for abolishing the economic illiteracy for farmers? "People go to the store to buy sugar, a seller (Samvel Alexanyan) first calls one price, then another." This approach is incomprehensible, the seller must evaluate the profit he expects to get ... That is if my sugar costs 355 drams, and it's profitable for me, then I should not care how much sugar has risen on the London Stock Exchange. " This is how Serzh Sargsyan's speech about the unreasonable rise in the price of sugar should sound. But he will never make such a speech. To rebuke the farmers who want to sell the apricots grown at the cost of great effort to the harvesters at a higher price is one thing, and it's quite another to conduct an education campaign against a confidant oligarch who is close to the economic issues. The latter one day may be offended and not provide the RPA with the required number of votes.

Let's put aside the pre-election representations of the Republicans and analyze the rise in the price of two particular goods. According to the official statistics, the butter and pork prices have risen the most of all in Armenia - by 40%. Prime Minister of Armenia Karen Karapetian explained the rise in price, in particular, for butter by 87%  by the increase in prices in the world. "What shall we do? We can not restrain these prices," he said at the end of October in Gyumri and advised to be patient to these rising costs.

And now, a little bit of the official statistics. According to the data published by the Customs Service of the Republic of Armenia, in the first half of this year, 2,361 thousand tons of butter was imported to the country. The customs value of the product amounted to $ 10.1 million, i.е. $ 4.4 per 1 kg. According to the other data of the same customs service, the volume of imports for the first 10 months reached 3.5 thousand tons, and the customs value of the goods was $ 16 million, i.е. $ 3.3 per 1 kg. It turns out that its price fell by $ 1.1 or 25%. And what happened to the prices in stores? It is impossible to be patient because this can not happen in a competitive economy.

No less interesting is the situation with pork. In the first half of the year, 2,2 thousand tons of the product were imported to Armenia. The customs value was $ 2.2 per 1 kg. And for July-October, it was imported 2,7 thousand tons at the customs cost of $ 2.3 per 1 kg. That is, in comparison with the beginning of the year, the cost of  1 kg of the imported pork rose by 4.5%, while in stores it went up by more than 40%.

Curiously, in Russia, with which Armenia does not have any customs borders and which is located in the same economic space, pork cheapens at a record pace. In particular, at the end of November, the price for the product declined by almost 15.4% compared to the beginning of the year.

In short, the prices in Armenia are not particularly related to the international trends. Price lists in the country are written and changed in accordance with the appetites of a group of people who control completely all the markets. And the classical market pricing mechanisms have been never complied by the Armenian oligarchs nether before, nor now…

(AMD 1000 = $ 2.07)

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