Armenia’s new plan: an economic revolution or empty promises?

(Nikol Pashinyan / Facebook)

On 8 February, Armenian Prime Minister Nikol Pashinyan introduced the government’s ‘revolutionary economic programme’. The programme promised to create ‘radical economic growth’, but critics say it lacks substance, putting too much emphasis on the actions of the public.

On 14 February, the ‘revolutionary’ programme extolled by Pashinyan was adopted by Parliament in an 88-40 vote.

In his speech to Parliament, Pashinyan emphasised the main points of the programme, with a focus on national unity and civil solidarity in addition to a public rejection of corruption.

He also discussed the separation of politics from business, and the creation of favourable businesses conditions, which would be achieved by steps such as eliminating artificial monopolies.

The five-year programme consists of seven provisions, from improving the armed forces to strengthening foreign policy, each with their own subpoints. Provisions 4 and 5 provide the framework for the proposed economic revolution.

Provision 4 addresses the government’s plan to eliminate corruption. According to the text, ‘fighting corruption is one of the key priorities of the government. In that fight, the government will be unyielding and intolerant’.

The provision goes on to state that a prerequisite to ending corruption is the establishment of an independent judiciary that would exclude corruption among judges. This system would not only be able to monitor corruption in the state, but also examine cases related to corruption.

Provision 5 elaborates that the state and government’s role is to make the lives of the people better and create more favourable conditions for their happiness. To this end, it says people should be more engaged in public life, via the economy, and be certain that they have a realistic opportunity to make changes.

A sub-point of this provision expands on this topic, stating that there is no legislative obstacle in Armenia to solving inequality. It is up to the government’s assertiveness and political will to come up with a solution to this problem.

‘Abstract concepts do not make an economic revolution’

Since being unveiled, the programme has come under fire for its lack of concrete numbers and timelines, and for passing the buck to regular people.

Derenik Malkhasyan, a political commentator at Politica.am, told OC Media that Armenians expect the programme to improve their socio-economic situation. He said people want the government programme to explain what positive changes will take place ‘in their lives, pockets, and refrigerators’ — and when. In this respect, he said the programme cannot be called ‘revolutionary’, because as of yet, nothing has actually changed in people’s lives.

With the expectation being that the government would take charge, Malkhasyan said that many people ‘were taken aback’ by the idea that it would be up to them to create an economic revolution by actively engaging in public life.

Nikol Pashinyan, who led the peaceful revolution that toppled the government of the Republican Party of Armenia, is now proposing an ‘economic revolution’ in the country (Mari Nikuradze/OC Media)

According to him, a better precedent is the Georgian model, where former President Mikheil Saakashvili attracted investments by effectively managing tax privileges, eliminating business related red-tape, and by developing infrastructure.

Pashinyan’s government, on the other hand, has argued that the Armenian public will bring about economic revolution through the same unity that made a political revolution a reality. As he said in his statement to Parliament on 14 February, ‘individual transformation is a crucial factor for public transformation’.

Hayk Konjoryan, an MP from Pashinyan’s My Step bloc, denied claims that the government was holding citizens primarily responsible for an economic revolution. He cited Pashinyan as saying ‘the government is responsible for taking steps one, two, three, four, and all the way to 100’ to reach the forecasted end — an economic revolution in this case. Citizens would only be responsible for what comes after, he insisted.

According to Konjoryan, in the past, people were forced to believe they could not do anything and that their vote would not change anything. Now, it is the other way around, he said. The Prime Minister said that ‘the country and its power belong to its people and they should have a say’, Konjoryan explained.

The opposition, the Bright Armenia and Prosperous Armenia parties, hold a different view. They have vigorously criticised the programme for having no structure, for not meeting the challenges the country faces, be they economic or social, and for not outlining mechanisms and timelines to achieve any targets.

Bright Armenia MP Gevorg Gorgisyan said in a debate that they had not seen any targeted steps towards the objectives so far. According to him, the programme does not outline any steps, such as a framework for citizens to start businesses.

‘Abstract concepts do not make an economic revolution’, Gorgisyan said during the debate. According to him, citizens expect ‘concrete actions’, which require political will, resistance, and knowledge.

A favourable business environment

Provision 5.1 of the government’s programme states that one of the key factors hindering Armenia’s development has been an absence of fairness, manifested in the existence and impunity of a privileged class. To fix this issue, the government expressed a will to ensure a fair and transparent business environment.

Pashinyan’s proposals include easing the ‘unbearable loan loads’ on agricultural workers and requiring shops to print cash receipts. However, these policies do not affect everyone equally.

Smbat (not his real name) has run a small shop in downtown Yerevan for close to 15 years. He knows all of his main customers by face, and therefore, has rarely printed cash receipts.

‘If I expose all my turnover, I will eventually end up with nothing,’ he told OC Media.

Smbat questioned why the government did not start enacting this policy for big businesses. According to him, once he sees measures being taken towards forcing ‘the sharks’ to follow the law, he will be ‘first’ to expose his actual turnover and pay all his taxes accordingly.

Until then, Smbat says that if the government is ‘dishonest’ they should ‘not expect us to be honest,’ adding that ‘selective equality is not a good thing’.

Smbat has also questioned how small businesses are expected to expand when interest rates for loans have ‘hit the ceiling’ and are now unreasonably high. According to him, if any small businesses want to grow — he himself wants to be a supermarket owner one day — they need a large amount of capital that can only be granted through loans.

He said favourable business conditions are only becoming more favourable for those who had already had an advantage in the first place, once again, big businesses.

‘How can they expect someone like me to pay all the crazy taxes, pay employees, repay loans, and still benefit? When they say favourable conditions for someone like me, I automatically think they will ease the interest rates at least. Instead, it’s going the other way around,’ he told OC Media.

Like Smbat, Khachik, a father of three, hoped to start a business following Pashinyan’s appeals. A Nagorno-Karabakh war veteran, who, as a result of a grenade explosion, was classified as having a disability. Khachik told OC Media that from the very first day, he supported the revolution and Pashinyan’s government.

Thousands came to the streets in April 2018 in support of Pashinyan's ‘Velvet Revolution’. (Mania Israyelyan / OC Media)
Jubilant crowds celebrated in Yerevan’s Republic Square after Pashinyan’s appointment as PM on 8 May, ending two decades of Republican Party (Armine Avetisyan /OC Media)

Following Pashinyan’s appeal ‘to come into the forefront and become a taxpayer’, Khachik decided to become an entrepreneur and turned down his social welfare pension, around ֏36,000 ($75) per month. ‘I want to work legally, I want to pay taxes and contribute to the country’s prosperity’, he told OC Media.

Khachik’s first idea was to import tangerines from Georgia and sell them in the market. However, to his deep disappointment, he found that at the border, fruit smugglers have ‘crooked deals’ that allow them to bypass customs. Therefore, while tangerines will cost him ֏250 ($0.50) per kilo, the above-mentioned dealers can sell them for ֏150 ($0.30). After learning of this, he gave up the idea and began looking at how to start an agribusiness.

In order to start this small-scale project, Khachik needed a loan from the bank. Though he ‘knocked on the doors of all the banks’, he was rejected everywhere because he was not a registered employee with a stable income that would guarantee he could repay the loan.

‘Indeed, there is no monopoly now, but neither is there a fair and equal environment’, he said, adding that the prime minister has repeatedly encouraged regular people to start businesses and make investments.

Khachik has frozen his business plans for now and is waiting until the law comes ‘to apply to everyone’. He still believes in the new government, however, and ‘expects changes soon’.

Vague policies in a vague plan

Andranik Tevanyan, director of the Politeconomy Research Institute, a local think-tank, told OC Media that he did not believe the government programme would bring ‘revolutionary GDP growth’.

Political scientist and economist Andranik Tevanyan said the government wasn't clear on it's GDP growth targets. (Andranik Tevanyan / Facebook)

He said that while bank interest rates were the responsibility of the Central Bank, not the government, there were actions the government could take to help small businesses.

Though the government envisaged a tax exemption for small social enterprises with an annual turnover of less than ֏24 million ($50,000), Tevanyan said this was not enough for most small businesses. According to him, the government could create a better environment for business by increasing the turnover threshold to ֏150–֏200 million ($300,000–$400,000).

As for what it means to create a ‘favourable environment’, Tevanyan said the phrasing was very vague, and that those who wrote it do not themselves understand what it means.

He added that there are no details or tools and mechanisms as to how they are going to create such an environment. Overall, Tevanyan said the programme was just another wish, with nothing to back it up.

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