Economist calls for revision of Armenia’s economic policy

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YEREVAN, January 31. /ARKA/. Armenia’s economic policy must be revised, Ashot Tavadyan, Doctor of Economics, said in an interview with the Public Television of Armenia.

“Our economic policy needs to be adjusted both in terms of investment and development. It is wrong to lock ourselves in, because there is no development without competition,” Tavadyan stressed, listing 5 important points that the authorities need to gradually enforce.

“Armenia is a member of the World Trade Organization (WTO), but we can protect ourselves by raising customs duties, coordinating them with the WTO. No need to sit and wait, we must act,” Tavadyan said.

1. The problem of “expensive” loans

Tavadyan said that according to a set of estimates, banking interest rates in Armenia are the highest in Europe, and the 4th highest in the whole world. ‘We need to follow financial developments in neighboring countries such as Georgia and Azerbaijan,” he said. At the same time, he pointed out that certain steps are already being taken towards cutting the rates. “I want to commend the Central Bank Chairman Martin Galstyan, who reduced the refinancing rate to 4.25% and this appeared to be instrumental in stabilizing the national currency rate,” Tavadyan stressed.

2. Taxes

According to Tavadyan, the authorities should revise tax rates downward. He cited comparative figures for taxes in Georgia and Armenia: In Georgia personal income tax rate is 20%, in Armenia- 23%, VAT in Georgia is 18% and 20% in Armenia. Profit tax rate in Georgia is 15% while in Armenia it is 18%. Tax rates in other neighboring countries are also lower than in Armenia.

“There is room for maneuvering here, in particular, regarding the export of non-ferrous metals. For example, we have not imposed taxes on the export of raw materials. Why? After all, the income from the sale of raw materials is less than from finished products. World prices for copper have sharply increased in recent months. We must take advantage of this too,” Tavadyan said.

3. Attracting investment

The third point is pricing and investment. Tavadyan believes that foreign investments can be brought to the country even in the current political situation. “This is realistic if the investment attraction mechanisms are adjusted. I have already listed two points – the policy of “cheap “loans and a drop in taxes,” Tavadyan said, pointing out the opening of markets for investors and shareholders, including those from abroad, as the third point. He stressed that practically all profitable companies in Armenia are registered as CJSCs. “This is a pseudo-market. It is necessary to open markets by founding open joint stock companies, including through administrative resources. Otherwise, we will not have investments,” he said.

Tavadyan pointed out that Armenia, first of all, pins hopes on investments from middle-class Diaspora Armenians. “If they see that a certain production is profitable in their historical homeland , say, the production of cognac and copper, then they will decide to purchase a share for themselves. This is where they should start,” Tavadyan said.

4. Corruption

Tavadyan said if there is no effective fight against corruption there will not be investments. According to him, pseudo-market relations are much worse than the use of administrative tools. “It is necessary, while preserving clear democratic principles, to use elements of administrative management for our economy to develop,” he said.

5. EEU and its capabilities

Tavadyan considers it important to take full advantage of the opportunities provided by Armenia’s membership in the Russia-led Eurasian Economic Union. He recalled that Armenia joined the EEU in order to be able to use cheap resources, including energy resources, and to export finished products.

According to him, processed (finished) products and their export not only provide income, but also create new jobs. “Our ratio of exports to GDP is about 26-27%, but for the development of such a small country with a limited market like Armenia, this figure should reach 50%,” the economist said.

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