Competitive Edge: Armenian entrepreneurs say light industry has potential for 60,000 jobs

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Representatives of Armenia’s light industry say that enterprises in the sector currently provide 6,000 jobs, but if the tax burden is decreased that number might rise to 60,000.

Entrepreneurs say that a year ago they signed a memorandum with the government which was based on the strategy of sector development, especially boosting exports.

“Unfortunately, even after a year nothing has changed. Coming against the Armenian version of bureaucratic hustle, sometimes we do not know how to make people carry out the functions they are paid for,” says Hovsep Poghosyan, the Co-Chair of the Light Industry Employers’ Union.

In order to boost the field, the government has conducted a special study; as a result during the next 10 years an opportunity of creating 15,000 jobs will be provided. During the Soviet years as many as 120,000 people were employed in Armenia’s light industry, within 20 years that number decreased 20 times.

“We have a potential of up till 60,000 jobs. But if we create that many well-paid jobs, we will fall under a tax burden of 26 percent. In this case we turn to the state to subsidize the expenses, so that we have circulation means to develop the production and boost the exports, as well as some tax privileges must be granted,” Poghosyan explained.

According to statistics, in Armenia annually $280 million-worth clothes are sold and only eight percent of these clothes is produced locally. In this case representatives of the light industry sector see the salvation in export only.

For 20 years knitwear producing company Tosp has been exporting 60-70 percent of its product. The head of the company, Suren Bekirski, said that Armenia’s 1.5-2 million market, only 2 percent of which are potential buyers, does not allow enterprises to record volume growth.

“We have always had 60-70 percent export, 35-40 percent sales in the local market; that is the most ideal version. If I realize 70 percent export and withstand the external market players who do not have the objective problems of our market, they have a clearer competitive field, I return stronger from there to the local market. But if I’m deprived of this or that opportunity, for instance, of export opportunity for different reasons, I start suffering in the internal market, the cost price rises because the volume decreases but my main expenses remain the same, I start having problems with the workforce, I cannot fully utilize them, and they leave as a result,” Bekirski explained.

Producers barely withstand competition next to companies from Turkey, Vietnam, Korea, China, Bangladesh.

“They have long been in the market and they do not have our problems. However, we say, hey, we have a loan for 15 percent, a general tax portfolio of almost 20 percent, how can I compete with them,” the entrepreneur said.

Addressing 140-million-strong Eurasian Economic Union (Russia, Belarus, Kazakhstan, Armenia) market, they say that all those doors that were never closed for them, opened de jure, and even taking two percent of that market will be profitable.

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