We need dialogue with society and businesses – Robert Kocharyan
In an interview with the 2rd.am website Armenia’s ex-president Robert Kocharyan spoke of the latest developments in Gyumri, economic and domestic political situation in Armenia.According to him, Armenia’s authorities should be ready for a candid dialogue with society and with the business community.
Mr Kocharyan, the first question is about the Gyumri tragedy. As soon as the murderer was detained, popular unrest spread throughout Gyumri, which developed into clashes with police amid high emotional tension. The major reason for the unrest – as well as for persistent popular discontent – was uncertainty over the following questions: which state is to try the murderer and where is he to serve his sentence? What should Armenia’s authorities have done in that situation?
The crime committed in Gyumri shocked entire Armenia because of its extreme cruelty. Public protests could have obviously developed into large-scale actions with unpredictable consequences. The authorities should have taken urgent preventive measures. First of all, they should have clearly assured the public that Armenia’s law-enforcement agencies would investigate the crime and the criminal would be convicted by an Armenian court (we have a precedent of 1999). I am sure that both the Armenian and the Russian side needed that because that would have precluded any attempts to let a particular tragic incident go all the way to the level of Armenian-Russian relations. Our officials’ confused and contradictory statements only poured oil on the flames. Regrettably, people vented their anger on Armenian policemen. In any way, it was a horrifying tragedy and my family and I are shocked and share common grief.
A slump in the national currency late last year caused a real shock among the population. Armenia had not seen such a serious depreciation of the Armenian dram for long. Government officials cited geopolitical reasons for the situation – rouble downfall, decline in world oil prices, anti-Russian sanctions. Do external factors alone account for the ‘black December’? Did Armenia’s authorities take adequate measures in that situation? Should further AMD depreciation be expected?
This is the second time for the past five years. Of course, pleading ‘external factors’ and playing a victim of geopolitical processes is the easiest way. Russian economy was in a much worse situation in 1998. A 6% economic decline was recorded, and the ruble showed triple depreciation against the USD. At present, Russia has huge gold and foreign currency reserves, which rules out a default. With all that, the Armenian dram showed stability despite Armenia’s weak economy and banking system.
Certainly, external factors play their role, but last December they exposed our ailing economy rather than caused that unhealthy situation. However, amid the pessimistic expectations, even minor speculations may prove decisive despite seeming financial stability.
The Central Bank of Armenia is officially responsible for Armenian currency and it made certain efforts to stabilize the Armenian dram. But it was not enough last December. All the branches of power had to coordinate their actions. But the results showed they were too late. Economists say that the authorities’ reputation and management efficiency is often more important than fundamental factors during crises.
As a negative factor, you mentioned also the fall in the prices of oil. It’s just the other way about. Oil-exporting countries take advantage from falling prices. Cheap petrol and diesel fuel are a good stimulus for economic development and can make up for the losses caused by the decreasing transfers from Russia - given cheap energy carriers’ multiplying effect on the economy.
Given the internationally observed trend, the gas supply prices may be revised too, if of course, the controversial agreement with Gazprom allows that.
What will be the situation with the [Armenian] Dram? The Dram exchange rate reflects the general situation of the economy and the payment balance. Their deterioration will make the Dram cheaper, while the improvement will foster. The Dram cannot live its own life, isolated from the general economy. Anyway, sharp fluctuations of the currency rate are impermissible; they jeopardize the financial sector, undermining trust in the national currency and hitting our citizens’ pockets.
In one of your interviews last year, you made a prediction that the country was entering into period of negative expectations. Some of those expectations have unfortunately come true. Besides, as early as just a couple of days ago, Moody’s downgraded Armenia’s sovereign rating, changing the estimated forecast as “negative”. What are your estimates of Armenia’s economic situation for the near future?
I cannot, unfortunately, say anything encouraging. If the economic policies remain unchanged, then it isn’t absolutely clear what should improve the situation or cause an economic growth, motivating its increased effectiveness. The downgrading of Armneia’s sovereign rating by Moody’s will make the foreign borrowings far more expensive for us, especially light of an increased foreign debt. In the mid-term perspective, the EEU economy will be in a state of recession; hence it is very difficult to assume any essential role there. The strictly devalued Ruble will seriously change the structure of the trade with Russia, without offering any advantage to our economy. There is a low likelihood of serious investments from Russia; due to the sanctions, they themselves have a problem with the refinancing of Western loans. We are not particularly attractive to western companies because of our membership in the EEU. It isn’t clear what our trade volumes with Iran will be. The international prices for colored metals are not going to rise, as the forecasts suggest; it’s going to be just vice versa. The introduction of stricter norms by Armenian banks raise the borrowed money’s price, making business crediting expensive. As for the development sector, [its prosperity] is not even to be dreamed of given such a micro-economy, population flow and decadent moods. With the economy’s monopolization increasing, the investment volumes decrease steadily, degrading the investment activity. The internal political situation is not likely to improve, as the political monopoly continues. So without drastic changes, it will be extremely difficult to resolve those numerous problems. We never hear any keynote speech from officials apart from speeches that everything is fine or will be fine. It is obvious that the evaluation of the country’s situation drastically varies from the authorities to the society, with either one or the other not being able to develop the necessary understanding of the reality. Perhaps the authorities really think that everything is all right or have been persuaded that nothing has changed. Neither scenario leaves room for optimism.
This automatically gives rise to the question as to what the authorities should do to extricate themselves from this difficult situation.
They have to first of all admit the existing fundamental problems and dispose themselves for an open dialogue with the society and the business community over ways towards overcoming the situation in the country, and the crisis. The groundwork of the success behind the authorities’ work is trust, which is missing today. The country needs drastic changes, but I do not absolutely mean constitutional reform. I wouldn’t like to one by one enumerate all the obvious and necessary steps. In Armenia, particularly its government, there aren’t few people who realize what needs to be done first. The biggest impediment towards success would a conflict between the political elite’s economic interests with the long-term interests of the country.
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