Kebab In Bellagio On Our Money

Naira Hayrumyan

Story from News:

Published: 13:17:28 – 17/11/2011

Prime Minister Tigran Sargsyan stated that the government is working
out a new concept of development of industry which will be based
on export-oriented production. Judging by the preliminary opinions,
the concept supposes particular preferences for those who will deal
with the production of goods for export.

But will the concept answer the question why it is expedient in
Armenia to engage in export and not import? Perhaps, the key to the
development lies not only in stimulation of export but in the creation
of conditions when investment in production will be more expedient
than import.

Now in Armenia any idiot can import things if they have a good “roof”
and strong fists and elbows. You went, you brought here, you sold and
received profit. And you think: how it happens that in other countries
it does not occur to businessmen to import as they only invest money
in production and even farming?

It turns out that in other countries, there are limitations on
markups on imported goods and even on locally produced products. If
you produce a product, you cannot sell it at a price above x percent
of its cost. Any country has its own limitation which, as a result,
varies between 10% and 25%. You can always sell goods at a higher
price but it will be assessed as excessive profit and you will have
to pay immense taxes.

Armenia has no such limitation. Importers can set any price they want
on the product in the production of which they invested no money at
all but just they went there and brought it. Moreover, there is an
unwritten rule. If you buy a product at USD 10 abroad, you can sell
it in Armenia at AMD 10 thousand which is equal to USD 25. Businessmen
across the world are amazed how Armenian importers draw a 250% profit.

What idiot will invest money in the production of something if they
get such profits from import? Actually, the lack of limits on markups
and progressive taxes on profit is the main obstacle to development
of production, including products for export.

The government hardly understands economy worse than journalists who
write about it. Perhaps, the proposed progressive tax and abolition
of some preferences to banks will somehow improve the situation. But
this will happen only if it does not deal with material production
and intellectual sphere where valuable capital is invested in
production but imports and banking where profit flows easily and
without investments.

The limitations of markups to control excessive profits may lead to
several positive outcomes: it will no longer be profitable for figures
having financial resources to invest in FMCGs, and they will not direct
their money into material production. Besides, prices on products will
be cut and people will not spend their savings on shopping, and capital
for investment will be left. This will reduce social polarization
and will lead to the simulation of the export-oriented production.

By now, half of Armenia is engaged in FMCG business, the rest buys
them on remittances. And the worst thing is that this money is not
invested in development only in kebabs at the Bellagio Restaurant.