HRANT BAGRATYAN: LET’S DRAW AND LIVE?
ArmInfo’s interview with Hrant Bagratyan, oppositionist MP, former
prime minister of Armenia, to share his views on the issue (part 2),
(part 1)
by Emmanuil Lazarian
Tuesday, August 20, 14:05
Before the crisis the key driver of economic growth in Armenia was
construction, today, it appears to be agriculture. This is progress,
this means diverse economy, food security, low inflation. But some
figures from our national reports look suspicious if not fake. The
key opponent here is the former Prime Minister of Armenia, MP Hrant
Bagratyan, who has shared his concern about this “juggle show”
with ArmInfo.
Mr. Bagratyan, you often criticize the reports of the National
Statistical Services in the parliament. Some people say this is
normal for an oppositionist, others agree with you. The statistics
for 2012 and the first half of 2013 say that economic activity in
the country is stable, with agriculture being in the vanguard. Are
you still suspicious of these figures?
I have repeatedly raised my doubts about the 7% economic growth
recorded by our statistical authorities last year, but I have received
no clear answer to my question what methods they used in calculating
this figure. They got this 7% growth by comparing the 3.8tln AMD GDP
in 2011 with the 3.9tln GDP in 2012. The National Statistical Service
reports that GDP deflator was -5% with inflation being more than 4%.
But there can’t be such a big gap between these indices. I asked
them to show me their calculations, but they piled me up with some
methodological stuff. A strange way to act, isn’t it? If everything is
clear, if our economy and assessment methods are unique, why don’t
they share them with me? Especially as they are obliged to do it
because I am an MP!
Do you mean they fake the figures?
I am sure they do! If they didn’t, they would not keep their
calculations secret. Simply they know that their figures are in an
absurd contrast with basic figures and economic rules. And they are
not alone in faking figures. Recently I found no smaller absurdities
in the World Bank’s statistics on Armenia. The point is that for the
last 20 years, Armenia on average used to grow by 7-8% per year, that
is to say, with higher rates than Russia, or for instance Georgia. In
the 1990-s the per capita national income was 2,900 Soviet roubles,
in Russia – 4,500, that is to say, by about 40% more. Today, the GDP
per capita is a little bit more than $3,000 in Armenia, and more than
$12,000 – in Russia, by 4 times more. Last year Armenia exceeded the
level of the 90-s on this indicator by 62%, while Russia – just by 8%.
“I informed the World Bank about that absurdity. Armenia was among
the most backward republics of the USSR at the WB website with GDP per
capita – $660. Can you imagine?! When I was Armenia’s premier in 1993,
I owned huge statistical information, but has never come across such an
open stupidity, I am sorry. Such is the result of the retrospective
re-calculation of the WB experts, which re-calculated from the
National Income to the GDP, as that time GDP was not calculated,
only the National Income. So, it turned out that the GDP per capita
in Russian Soviet Socialistic Republic was $3,600, that is to say, by
6 times less than in Armenia, and $1,800 – in the Soviet Georgia. It
means that Georgia lived three times better than Armenia.
It is funny that Armenia with its National Income 2,950 roubles per
capita was ahead of Georgia with its 2,730 roubles. And Azerbaijan
turned out to live by 2.5 times better Soviet Armenia. It is hard to
imagine absurdness of such figures. I can’t understand, why the WB
made such an open forgery today. This is a theater of absurd. This
is simply inadmissible
As far as I remember you speeches in the parliament, in agricultural
statistics we also have some abracadabra.
Yes, we do. They say that in 2012 we produced 812,000 tons of
vegetables and very insignificant exports. This is 812mln kg. We have
3,000,000 people. So, it turns out that each Armenian eats 240 kg a
year or almost one kg a day. The same year we produced 645,000 tons of
potato, that is, 645mln kg or 212 kg per capita. Do you eat so much
potato? One more example, last year we are reported to have produced
241mln kg of grapes. Of this quantity only 100mln kg was processed.
So, it turns out that we ate the rest – almost 47 kg per capita a
month! I can’t say why the Agriculture Minister lied so openly. The
National Statistical Service said it was not responsible for
the figures as they were provided by the Ministry and regional
administrations. Is this right? I was one of the authors of our
agrarian reforms and I know this sphere. So, I can’t help wondering
at the cynicism of those faking the figures. This reminds me of the
Brezhnev times. In 2012 the share of agriculture in GDP was 240% of
the level of 1990. I should be happy to see the results of my reforms.
But I am not because I know what mistakes our government has committed
and what problems our agriculture has. Yes, we have a growth in
this sector, but it cannot be so high. One Armavir region cannot
produce as many plants as whole Armenia did in 1990. Otherwise,
this would be a world record! This is a whitewashing, and they are
doing it with pleasure! This is like that well-known children’s song,
“Let’s draw and live!”
I cannot but ask you about our industry. Yet a young journalist in
the 1990s I used to slate the IMF and the WB for their attempts to
convince our authorities that Armenia needed no industry and would
prosper with services, tourism and agriculture. In those times Armenia
was a developed science-intensive industrial republic. I am not trying
to take digs at you, but let’s admit that our short-sightedness has
proved costly for us. Today we are trying to create something new,
but you cannot build a strong house without firm foundations and
professional constructors, can you?
At those times we were aware of what you are talking about now, but
we were moving along an unbeaten track. Our country was facing an
energy and transport crisis and a war. We tried to save our industrial
companies but managed to save very few of them. We committed lots of
mistakes. We sacrificed a lot for the sake of macro-stability. We were
idealists. But not all of our present problems are the fruits of those
times. Today we must restore our industry, but we need new schemes,
we need to make it science-intensive, based on bigger additional
value margin and wider internal cooperation. This is a hard job. There
has been a lot of talk about this in the last years, but there is no
progress so far. The key obstacle is our chronic economic problems. I
first of all mean very high monopoly. Our economy is in the hands
of clans, who have men in the Cabinet and the parliament. They are
competing with one another and are unwilling to cooperate. Built by our
second President Robert Kocharyan in the late 1990s-the early 2000s,
this oligarchic system keeps SMEs in tight grip. Our billionaires
can be found in Forbes lists but still continue producing and selling
pizza, lemonade, roses as if our SMEs are unable to do this. Moreover,
they enjoy tax preferences for this trifling activity.
Most of our oligarchs have highly diversified businesses – a
small factory, a bank, a hotel, a restaurant, a cafe. Medium-sized
businessmen are debarred from these sectors and would face all kinds
of obstacles, should they persist and try to compete. As a result,
we see no truly industrial high-tech company in Armenia except for
those owned by big foreign investors. In meat, fruit and vegetable
processing and dairy production things are much better. Here we
are keeping pace with the world. We are doing quite well in egg and
chicken production. Our Yerevan Brandy Company has long improved the
Soviet-time level in terms of both production and technology. But
there are sectors whose problems are very hard to explain. Our shoe
and light industries are declining despite their good traditions. So,
I think our authorities must give a serious through to how they
can revive those sectors, especially as the times when we preferred
consuming cheap but low-quality Turkish and Chinese analogues have
passed and the niche is vacant. In machine tool building we have
almost nothing. Here we have a high-tech accumulator plant, but its
problem is that it is faced with a monopoly of rival importers. I
think the Government must help such projects and protect them from
“import mafia” and its aggressive attacks.
How can we break that oligarchic synergy of big business and politics?
The Government is promising to do it, but what we see instead are
yet new takeover deals. The swelling oligarchic capital is swallowing
more and more SMEs. Sometimes, they do it using administrative rather
than market rules. We have lots of examples of this. You cannot hide
an eel in a sack, can you?
Yes, we have such a tendency, and it is quite dangerous. I have
repeatedly suggested developing and applying popular capitalism
principles, based on tough regulation and peaceful coexistence of
big, medium-sized and small businesses. We could do it by adopting
a new taxation regime. Otherwise, we will continue losing 50,000
jobs per each new 40,000 ones. Just remember how many small lapidary
companies we had. And all of them have been closed. In fact, we have
lost a whole industry, a field of activity where we were among the
world’s leaders. We have also lost our light industry. As a result,
we are losing our economically active citizens and are forced to
feign a growth.
In fact, we don’t have a serious economic infrastructure in Armenia.
Nor have we real stock and commodity exchanges or successful investment
companies and funds. In fact, we don’t have anything of what makes
a real market economy.
In the mid 1990s we had all of that. But as oligarchy was growing,
it was feeling no more need for a classic market economy. But there
is one more serious problem that curbs the growth of any business
in Armenia. I mean the constantly growing energy costs. Just look
what is going on with the gas price. The Russians raised it by 15%,
while for our consumers the price was raised by 18%, with the electric
power price increased by as much as 27%. In our country only 1/3 of
power generating capacities work on gas, with the other 1/3s being
the nuclear power plant and hydro power stations. This means that the
electricity tariff should have been raised by no more than 5-6%. This
will have very bad consequences for our economy. Our products will
become noncompetitive. Why did we create an energy monopoly in a
small country like Armenia? There was no such a need, was there? Now
we are blaming the Russians for this. I have friends in Russia who
are involved in these processes and they say, “Dear Armenians, please
don’t lay the blame on us. You better look at what is going on in your
country.” We, the Armenians, are like the Serbs: we believe that every
day before going to bed each man in Moscow or St. Petersburg spends
at least one minute to think about our hard lot. Our constant claims
are becoming much too obtrusive and are beginning to annoy them. We
are ready to blame for our troubles anybody but our own selves!
The financial analysis of the biggest companies of Armenia carried
out by our agency shows that the revenues of ordinary producers are
dropping unlike the incomes of natural and artificial monopolies.
And things will be getting even worse. First of all, the rise in
energy bills will cause a growth in domestic prices. Producers will
face a shrinking demand and the need to curtail their activities and
to cut their staffs. The Central Bank has already been forced to raise
its rate to 8.5% in order to avoid inflation even though the economic
situation requires softer slending terms. This is a kind of a vicious
circle, a growing whirlpool that can eventually suck our economy down.
Another big problem is continuing emigration and the consequent lack
of labor force. It’s strange to say but even though our wages are very
low, our statistics report them to be 15% higher than in Ukraine and
30$% higher than in Georgia.
Yes, I see, and it seems quite strange to me as well…
The reasons of that I have already brought above. Here in Armenia
people avoid agricultural jobs for 5,000 drams daily pay. In the
meanwhile, I met a Georgian woman in Noyemberyan who worked as a
waitress in a restaurant and had to cross the border everyday to get
to work. Why are salaries relatively higher in our country? – Simply,
because up to 50,000 people leave our country every year. That is
why the salaries are relatively higher here. Even if demand for labor
remains the same, supply falls 2%-3% a year. The problem runs deep.
Actually, no one cares why and how many people leave the country. In
the meanwhile, what we have are empty homes, uncultivated lands,
shrinking demand for products and transport throughout the country. On
the other hand, economic concentration grows and a question arises:
who to produce for? In the wake of migration, the country is facing
also capital outflow. It has not reached catastrophic proportions yet,
but it has grown to 700 million dollars over the last years. A few
years ago, it was some 500 million dollars.
Incidentally, our statistics unlike those of many other countries
does not publish data on capital drain.
It shows inflow of capital but not outflow. However, there are primary
income distribution accounts, secondary income distribution accounts,
and capital transaction accounts in the system of national accounts
where a professional would clearly see how much money really flows out
of the country. So, what’s good in the idea of investing the surplus
capital in economy amid shrinking consumer market and monopolized
field?
There is another painful issue that is much spoken off but still
remains untackled. I mean the possibilities of raising the national
capital of Armenia from all over the world. For that purpose, they
have established the PanArmenian Bank that proved worthless. The idea
was promoted, then devaluated and diluted.
There was no need to create any PanArmenian Bank. It was a “dead-born”
project. It must be a PanArmenian Investment Fund. You invest in it
and the country guarantees, for instance, a 5% yield. The plan is a
follows: you either invest in the purchase of shares of a specific
project through the fund or purchase a common share of the Investment
Fund. It can be considered as an idea to democratizing investments.
Who in the country can make investments? – Only oligarchs and
wealthy people. In the meanwhile, many our compatriots abroad have
idle resources. I have repeatedly said that assets of the Armenians
worldwide – that is 10 million people at the working age – amount to
700 billion US dollars. Annual profit from those assets is some 100
billion dollars. Average income of a representative of the Armenian
Diaspora is higher than the average income in the country he lives in
due to his genetic living and business activity and the fact that his
not burdened with any civil obligations. The overwhelming majority of
our compatriots would like to make their contribution to the revival
of their Motherland, but they do not know how to do that to overcome
hidden dangers and avoid being deceived by Armenian oligarchs and
the government, as it usually happens in our country.
They live in their countries working day and night. They have
neither time nor opportunity to start business in Armenia. Hence,
the Pan-Armenian National Investment Fund, based on a classic system
of corporate management, where the government holds no more than 10%
of the statutory capital, can undertake a kind of mediation mission.
There is no need to invent anything new for efficient operation of the
Fund. Such mechanisms are widely practiced in the world. Hayastan All
Armenian Fund is playing out, though the donations it raises are very
important. However, these donations are used to settle vital social
and strategic problems. In the meanwhile, we don’t need to boost the
economy. Let’s give the people guarantees of return on investments,
build a really working democratic mechanism of management and operation
of the given structure, and, be sure, the Fund will become an important
component of the country’s economic rehabilitation.
Thank you