ANKARA: Armenia-Turkey: Opportunities for economic cooperation

Armenia-Turkey: Opportunities for economic cooperation Print

Friday , 10 August 2007


When thinking over the opportunities for economic cooperation and
interaction between Armenia and Turkey in the event that the border is
opened, we need to pay special attention to the export structures of both

>From economic theory it is known that when a small and a big market
cooperate, preference is given to the former and it gains more. This is
called "the advantage of being small." Nevertheless it is obvious that,
though the reopening of the border is more profitable for Armenia in the
economic sense, Turkey will gain much more revenue in a political sense. Let’s
first study the economic issues.

The agricultural sector holds a firm place in Turkey’s export structure.
After the opening of the Turkish-Armenian border, the same sector of the
Armenian economy will also redirect to export on a much higher scale. But
these exports from Armenia will be in different denominations because they
will not be able to compete with Turkey when it comes to price (labor costs
are cheaper in Turkey). On the other hand, mainly because of the closed
border, Turkey’s boundary regions are busy with small agricultural farms and
local crafts. In this area, for example, agricultural products from Armenia
will have a qualitative advantage.

In recent years Turkey’s exports have included various electric devices
(including those from the IT sector) and a chemical industry, things that
have only been imported by Armenia on a small scale. In the event the border
is opened, the scale of this export will rise instantly because of the lower
prices. Armenian alcohol and tobacco production will find a market in
Turkey, and also through it to the European markets for a lower cost. This
"intervention" will create a competitive, "market" atmosphere in Turkey and
vice versa. Turkey’s building materials industry is also highly developed
and will find Armenia ready to import. Despite popular opinion, there is no
fear in Armenia that an opening of the border will harm the local sector;
there will be a competitive environment between the two markets. For
example, during the early 1990s when Iranian markets "attacked" Armenia, the
latter competed with Iran shortly afterward.

The most important point is the opportunity for trade of power/energy
resources between Armenia and Turkey. In the event the Turkish-Armenian
border is opened, there will be an opportunity for Armenia to sell its
abundant electrical energy to Turkey. Armenia is currently capable of
producing over 1,000 MW more than its domestic need. Exporting this surplus
will bring the country around $190 million, according to current electricity
costs. It already sells to Georgia and Iran, but Turkey’s eastern provinces
also have a need for electricity. It might also be possible in the future to
design some cooperative enterprises in which, for example, electricity comes
from Armenia and raw materials from Turkey.

For the Turkish economy, especially for the development of human resources
and increased income for people in the eastern regions (mainly populated
with those of Kurdish origin), there will be a flood of tourists from
Armenia and the diaspora.

There are a few steps that would be necessary to for the normalization of
economic relations and, more importantly, for creating the necessary trust
for those relations at any level. First, it is crucial to create a "special
economic zone" in the border areas for trade between the two countries for a
certain amount of time (such rumors stirred in late March but never came to
pass). It is assumed that such a measure would create the necessary basis
for a favorable atmosphere within the publics of the two nations. It is
necessary to mention that, since 1996 when communication between Yerevan and
Ankara was opened, the base for such an atmosphere has been created.

Another difficult question has to deal with the border regions of Armenia
and Turkey. In Turkey’s eastern regions (Ardahan, Kars, etc.) there lives a
large Kurdish population, and undoubtedly the level of unemployment is
higher than in Armenia’s border regions. However the living standards in
both areas are much lower than those provided by the average income of their
country’s centers. Both countries have seen the populations of these regions
move to big cities in search of better lives and, more often than not, they
never return. To prevent the fatal influence of a probable large-scale
immigration of Turkish labor to Armenia’s labor market (and vice versa), it
seems necessary to come up with some bilateral quota agreement on labor

Indeed, such methods would lead to real normalization of bilateral relations
and would create a confidence that would serve as the basis for
intercultural dialogue. As far as economic benefits go, much seems possible
after the opening of the border. In the political sense, such a move would
reflect positively particularly when it comes to Turkey’s international
image, including negotiations with EU and "strange" relations with Turkey’s
ally the United States. And it is obvious that such benefits will work to
counterbalance short-term negative histories in relations with other states.
Thus this was? fair point of view from Yerevan and I hope for dialogue with
Turkey. After all we are neighbors and cannot afford to be strangers any

—————————————- –
* Managing editor of the Actual Policy journal

Originally published in TZ