8 years of deception and the decline of Armenia’s economy

8 years ago, deceiving the people, the young revolutionaries led by Nikol Pashinyan came to power, promising to implement an economic and technological revolution in Armenia, promising to ensure a large flow of investments, establish a fair competitive environment and social justice.

At that time, public expectations were very high, they hoped that the political change would turn into an economic and social breakthrough. However, after 8 years, we have the fact that in the life of the people, apart from the losses, not a single breakthrough happened.

Instead, a breakthrough took place in the life of CP members. People who did not have money for a TV and a vacuum cleaner are now buying or building apartments and houses worth hundreds of thousands of dollars.

The lives of these people have changed at a revolutionary pace, and most of the citizens have continued to barely make ends meet. It is not surprising that the level of poverty in Armenia continues to be so high even after years.

If we remove the changes in the calculation methodology, which, as is known, are often made for what or for whom, poverty in Armenia has almost remained at the level it was years ago. And it is not known what they did with the billions of dollars that they put on the necks of the state and the people through debts.

Not only the promised social, but also the “technological revolution” remained at the level of political speech. It is regularly remembered that the industry should go through a phase of technological re-equipment, increase in productivity, and agriculture should become efficient and modern. However, these changes were not registered at the systemic level in the real economy.

There are no technological developments in industry as well as in agriculture. Almost half of the arable land of agricultural significance remains uncultivated even today. The result would be that agriculture would not grow for years.

Production volumes of many agricultural products have been reduced in recent years, leading to an increase in their prices in consumer markets. During this period, some agricultural products managed to double, even triple in price. But the peasant almost did not benefit from it, because on the one hand, the production was reduced, on the other hand, the price of the product rose sharply.

Instead of revolutionary developments, during this period the structure of the economy not only did not become better, more efficient, but also moved from production branches to non-production branches. The trade and services sector has significantly increased its weight, while the real economy, industry and agriculture, has declined relatively.

This is a worrying and dangerous trend for the economy, because trade only redistributes the value already created, rather than creating new values. When economic growth is based on consumption and imports, it becomes vulnerable to external shocks and does not ensure long-term sustainable development.

Even in the years when high economic growth was recorded in Armenia, its structure did not ensure qualitative progress.

Growth in recent years has been heavily dependent on services and external financial inflows, while the industrial and agricultural base has not strengthened. The economy has not become more resilient and has not received the structure that could ensure long-term development. Diversification of exports has remained at the level of empty talk, and the dependence on imports has increased.

Instead of an economic revolution, only debts have increased at revolutionary rates. At one time, the authorities were criticized for taking debts, they promised to reduce the debt burden, but in 8 years they have more than doubled the state debt. Debt has become one of the main instruments of economic policy, which has created long-term risks, limiting the fiscal flexibility of the budget and increasing dependence on external financing. It is a well-known fact that when economic growth is fueled by debt rather than productivity growth, that growth cannot be sustainable and long-term.

They claimed that after the political change, investments will “pour into Armenia”. However, investment flows remained volatile and often depended on one-off transactions.

Recently, the Minister of Economy made a note about investments, trying to create the impression that investments are already flooding Armenia. However, he “accidentally” did not mention how many investments there were in the real economy. He “forgot” to say that during the whole of last year, net flows of foreign investments made in the real economy amounted to only 34 billion drams, and direct investments – 93 billion drams. If we convert it into foreign currency, it will be 89 million dollars in one case, and 244 million dollars in the other case.

These are small amounts for the real economy. That is why the real economy in Armenia is in such a poor state. Although what should be expected in a country where the government is ready to enter the pocket of business at an opportune moment?

Protection of property rights is key for any investor. And when the government starts to get involved as a co-owner in private business, or situations arise where property is redistributed for political purposes, it is the biggest threat for the investor. And in this case, no change in the law on investments, which the authorities are making now, can restore the confidence of investors.

Investors’ trust should be considered at the time when the government directly entered the pocket of the business, adapting the laws to itself, retaliating against the owner for political purposes, taking away the business belonging to him.

HAKOB KOCHARYAN

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