Vahagn Khachatryan: "The model of an economy based on monopolies has exhausted itself"

Vahagn Khachatryan: "The model of an economy based on monopolies has exhausted itself"

The head of the economic commission of the opposition party Armenian National Congress, Vahagn Khachatryan, answered Vestnik Kavkaza's questions about the impact of the political situation in Armenia on the country's economy.

- The opposition does not recognize the results of the referendum on the constitutional amendments held on December 6th. The voting process was criticized even by some international organizations. What impact could this have on the Armenian economy?

- All possible means of fraud were used during the referendum. The voting process and its results must be included in the Guinness Book of Records. Everyone 'voted', even those who weren't in the country at the time, those who are no longer citizens of Armenia and even dead people. A country with such a voting institution will never succeed. This situation will surely affect the economy. After all, the question of the reliability of the country's economy, where he is going to invest, is very important for the investor. And our country in this respect is not reliable – the same people periodically return to power here.

- Is it possible that the reports of the authoritative international organization Global Financial Integrity on large amounts of capital illegally exported from the country and high level of corruption have become such a negative signal for Armenia?

- Illegal export of capital in recent years amounted to 983 million dollars. It's a huge figure! These reports indicate the presence of the shadow economy in Armenia and the fact that the government is mired in lawlessness. Armenia is considered to be a favorable country for all sorts of illegal financial transactions, including money laundering. The data recorded in the reports may lead to the fact that individual investors, organizations or states will be more cautious in matters of investing, providing grants or loans to Armenia. Moreover, against the background of the processes occurring in the world today, in particular the fight against terrorism, the illegal withdrawal of large amounts of capital cannot cause much interest from a number of organizations and states. It is no secret that the illegal export of capital is linked with such unacceptable events in the world as illegal purchases and sales of weapons, drugs and so on. The state can have serious problems.

- 2015 is coming to an end. Which of its trends do you consider important?

- Economists warned that 2015 will be challenging, but the authorities ignored these forecasts. In September, the Ministry of Finance, citing a lack of economic growth, reported about problems with the collection of taxes. The ANC proposed to make budget cuts like Russia did, but the government rejected this idea. As a result, the budget deficit has doubled. During the last year the country's debt increased by 1.5 billion. It is expected that in 2016 the volume of foreign debt will amount to 5.6 billion dollars. Meanwhile, in 2008, before the current rulers came to power, the figure was only 1.5 billion, that is, in the last 7 years the external public debt has increased by 3.8 times. At the same time, programs aimed at economic development were not implemented, that is, the authorities created new debts to spend the money. Other typical feature is the reduction in remittances, most of which are send to Armenia from Russia. The Russian ruble against the dollar is decreasing, therefore the flow of transfers to Armenia is also decreasing. This dramatically brings down the balance of payments in the country. There are other problems, including a sharp reduction in investments. If in the first half of 2011 the inflow of direct foreign investments to Armenia amounted to 366 million dollars, according to preliminary data for January-June 2015, it was only 64 million.

- The state budget for 2016 provided for economic growth of 2.2%. Will it be possible to resolve the pressing socio-economic problems under such a scenario?

- Here's the data developed by opposition economists to show what economic growth of 2.2% means for Armenia. An acceptable unemployment rate in the world of 6% (today, according to official figures, it is 18.4%), productivity of 5% and zero migration requires GDP growth of 7% in Armenia, then the migration will stop in 2019-2020. Growth of 10% solves the problem of migration in two years. Obviously, the migration will continues if the growth will be 2.2%. According to official data, about 300 thousand people have left the country over the last 8 years.

The model of Armenia's economic development, which has promoted the monopolization and development of the sphere of imports for a long time, has exhausted its resources and become a brake. To overcome this situation, we need new approaches, the essence of which is demonopolization of the economy, increasing domestic competition in the country not only in the economy but also in other spheres of social and political life, the eradication of corruption. Today, the authorities are engaged only in solving situational problems, not in the creation and implementation of development programs.