THE “LAST” SUPPER OF ARMENIAN BANKS
James Hakobyan
14:33 12/02/2013
Story from Lragir.am News:
According to the Central Bank, net profit of banks in 2012 was 42.4
billion drams. In 2011 it was 33.1 billion drams. The profit of banks
has grown by 28%.
This is the paradox of the Armenian economy. The economy has just
started recovering from the crisis with only several percent of
growth following the 14% decline in 2009. Hence, it has not even
grown enough to reach the zero point yet while the profit of bank
has grown straight up at an impressive pace.
The Armenian government advertises banks as the best-established branch
of economy. After the global crisis the Armenian government’s pride
grew into boasting. The authorities announced that the big banks of
the world went broke while the Armenian banks were stable.
At first sight, this is something to be proud of and boast. However,
this is an amateur view. Even average economists and finance
specialists will perhaps confirm that something is wrong if the real
sector of the economy has not caught up with the pre-crisis level
while the banks close the year with a 30% net profit.
It means that the banks are not only isolated from the real sector but
also feed on and grow fat at the expense of development of the real
sector. Banks in Armenia devour the economy and thus remain stable.
The authorities have helped them, especially since the rate of dollar
dropped from 600 to 300 drams, hitting local production and actually
robbing those receiving over 2 billion dollars of remittances from
Russia.
This was done through a deal between President Kocharyan and the
president of the Central Bank Tigran Sargsyan with the connivance
of Prime Minister Andranik Margaryan. It was the period of the full
breakfast of the banks.
The deal between President Sargsyan and Prime Minister Sargsyan was a
big lunch for the banks. In the framework of reduction of corruption
risks almost all the transactions are to be done via banks, even
technical examination of cars. Perhaps branch offices of banks will
soon open near public toilets where it will be possible to make
payments for using them.
On the one hand, it is clear that the banks are an important tool of
control considering the high level of shadow economy in Armenia. On
the other hand, it is obvious that when only this tool is used from
the entire package, and no other tools are used to make the real
sector attractive for investments, provide growth, free competition
and protection of property through independent judiciary, the banks
threaten the economy rather than serve as a tool for healing the
economy.
It is highly important to have stable, developed banks in Armenia,
ensure high paid jobs, attract intellectual resource and establish
a high business culture, mentality and ethic. However, first, it is
necessary to be highly cautious on this way otherwise the real sector
of the economy will be harmed. Second, some of the banks are the
“wallets” of the criminal-oligarchic business clans. In other words,
most clans have their banks where they keep and circulate their money.
It is not accidental that a lot of banks open in such a small market as
Armenia. This is the paradox of the economy rather than the magnetism
of banking.
Consequently, this situation which arouses a feeling of pride at
first sight should cause concerns as the government and the banks
are preparing the dinner.