"AND IT WAS NOT I, MARK YOU, WHO SAID THIS…"

Following the collapse of the Soviet Union, each republic, by relying either on its own efforts or on help from outside began to develop its national economy and to integrate into the world economic space. Some managed to do so, others didn't, some countries are making progress and developing their economy at a fast pace, whereas others are gradually moving from one crisis situation to another. And what is the state of the economy of our "territorially preoccupied" neighbour, the "long-suffering" Armenia?

An expert opinion

In 2011 the American magazine Forbes placed Armenia in second place after Madagascar in its ratings of the world's ten worst economies. In compiling its annual ratings of the world's worst economies the magazine assessed 177 countries for average statistics over three years: growth of GDP, inflation (including the assessments of the IMF for 2012), per capita GDP and current balance of payments, showing whether a country imports more than it exports.

At the same time the magazine points out that Armenia's per capita GDP is $2,959 - three times less than Turkey, and inflation stands at 7%. The level of development of the Armenian economy, which depends to a large degree on the emigrant diaspora, fell 15% in 2009. On top of that Russia reduced its exports of diamonds, which also impacted on Armenia's once flourishing manufacturing industry. Forecasts for the future are also not very bright for the small republic which is fully dependent on Russia and Iran when it comes to energy carriers.

To avoid accusations of a lack of objectivity, we make reference only to Armenian sources of information - the Armenian statistical service, Armenian experts and political figures.

…so many mistakes made

Analyzing the economic situation in the country, Vardan Oskanyan, the former Armenian foreign minister and founder of the Civilitas Foundation, notes: "There are many reasons why the country has found itself in this situation…First: in 2008-09 the government failed to appreciate the whole seriousness of the world economic crisis for Armenia. Second: after it realised that the consequences of the crisis in Armenia were inevitable, it failed to draw up and implement a proper policy. Third: the huge finances which were raised in haste, with the pressure of a deadline, were incorrectly used. Fourth: the government was not bold enough to implement the structural changes which were so vital. As a result, we found ourselves in a grave economic situation. The list of economic problems facing Armenia is very long. The first problem is extremely low growth in conditions of high inflation (11.3% according to the latest figures), as a result of which poverty has worsened. The second problem is a budget deficit on four indices. In other words, a budget deficit of 9% of GDP, a national debt of 43% of GDP and a negative trade balance of 23% of GDP, and from day to day dwindling national reserves as a result of stronger intervention aimed at maintaining the stability of the exchange rate of the dram.

…In Armenia's banking system today there are two extremely negative trends. First: lending interest rates are increasing more and more instead of reducing. Second: mortgage and consumer credit has been substantially reduced, and instead Lombard credits have increased. People are mortgaging in order to survive."

"When imports outweigh exports you get an adverse balance. And transfers will not cover the deficit by half. For this reason the current account of the balance of payments is a negative one. At the end of the day, imports lead to an increase in debt. Armenia's debt is 40% of GDP, and that is already dangerous. If it gets any bigger the situation will become critical. This is one of the 'black holes' of the economy," Abel Aganbegyan, a well-known economist of Armenian origin and an academician of the Russian Academy of Sciences, believes.

The situation is the same in the so-called "NKR", the Azerbaijani territory occupied by Armenia: imports are $313.1m and exports $79.6m.

Who pays for the banquet?

According to figures of the Armenian National Statistical Service, as of 30 December 2011 the country's state debt, external and internal, was $4bn. In the course of 2011 the volume of external state debt increased by 8.2%, or $270m. Armenia's biggest creditors are still the World Bank, whom the country owes $1.33bn, and the International Monetary Fund - $827m. Others like them are Russia ($500m, 14%) and Japan ($397m, 11.1%).

What conclusions can be made here - the country is living off injections from the diaspora and on debt in the hope that in the future this will be written off because of the "long-suffering Armenian people".

The level of the dependence of the Armenian economy on private transfers has not been reduced in the past five years and continues to remain quite high, Manuk Ergnyan, chairman of the "Economy and Values" research centre, has said. According to the National Report on Competitiveness for 2011-2012, the proportion of private transfers in household incomes, according to official figures, is about 10%, but some experts point out that this figure is in fact much higher. According to Ergnyan, the report carries out an analysis of the level of Armenia's dependence on private transfers compared with 20 countries in which this figure is the highest in the world. Among these countries are Bangladesh, Philippines, Moldova, Nicaragua, Zambia, Kyrgyzstan, Tajikistan, Honduras, Jamaica, Haiti, Samoa and Lesotho. "Compared with them Armenia occupies one of the lowest positions, but whereas in these countries the level of the dependence of the economy on transfers has gone down since 2005, in Armenia it remains the same," Ergnyan notes.

According to figures of the Central Bank, in 2011 about $1,547m passed through the Armenian banking system in the name of private individuals for non-commercial purposes, an increase of 19.6% compared with 2010.

Apart from the negative balance of foreign trade, academician Aganbegyan points out yet another disaster of the Armenian economy: "In the past 10 years industrial growth has not exceeded 5% in Armenia. This is a consequence of monopolization, because industry does not need monopolies." He points out that monopolization in Armenia affects mainly imports, because the biggest sums can be earned in this way. In the academician's opinion, the current level of monopolization is very dangerous because it stops the economy - and industry, first and foremost - from developing.

Monopolism in the country's economy brings with it inflation, dearer goods and services and the impoverishment of the population. In April 2012 in Armenia petrol and diesel went up by 5.8% and 2.3% respectively compared with March, according to the Armenian National Statistical Service. In April 2012, compared with the same period last year, petrol and diesel prices increased by 15.3% and 9.3%; compared with December 2011 the prices increased by 12.8% and 4.9% respectively. As is known, the increase in cost of energy carriers automatically brings with it an increase in prices for all other products and services, too.

The current situation in the Armenian economy is reaching the point where potential investors are trying to give the country a wide berth. Nikolay Baghdasaryan, a member of the Supervisory Board of Lawyers, notes that "today foreign investors and even members of the Armenian diaspora prefer to take their business out of Armenia to Georgia. This is actually happening in Armenia and it would be stupid to deny it." His colleague, the lawyer Samvel Dzhaginyan, points to the fact that members of the diaspora feel their business is unprotected in Armenia: "Unsure that their business is protected, and constantly running up against problems and not getting support from the law-enforcement bodies, they cannot adapt to the situation in Armenia and are leaving."

A clear sign of the attitude of investors to the country is the lack of even such a world-wide brand as McDonald's in Armenia, at a time when there are 32,000 restaurants in 118 countries operating under the McDonald's brand.

Emigration and its consequences

The disasters of the Armenian economy are leading to an exodus of the population from the country. According to Armenia's State Migration Service, 26,000 people on average leave the country every year. According to the head of the service, Gagik Yeganyan, the volumes of migration from Armenia in 1998-2001 were about 1.1m people. From 2002 to 2007 migration was in the region of 150,000. Thus, Yeganyan believes that over the last 10 years the total number of migrants has been about 260,000.

We should point out that according to the Armenian National Statistical Service, the negative balance of migration in 2011 was 43,820 persons, and in 2010 - 46,684.

In despatches in WikiLeaks' "Armenian dossier" American diplomats are sounding the alarm: the monstrous level of unemployment in the country is forcing many women to take up prostitution. "Girls of 11-12 years of age have started going on the game," US ambassador John Evans notes. More and more parents are sending their adolescent girls to work in Turkey and the UAE. Meanwhile, the country's authorities see no problem in the trading of people.

Whereas before 1999 the population left the republic because of a lack of jobs, after that it was because of the impossibility of earning enough money to live on. Thus, what we are seeing is an undermining of the Armenian people's faith in their country's future. 

Labour migrants predominate among those drawn into the flood of emigration. Today, as in the past two decades, the main destinations of the migrants are Russia, the CIS countries and the US.

According to figures of the Annual Report of the international labour organization Global Employment Trends-2012 on the problem of unemployment in the world, 13.7% of labour migrants in the Russian Federation are citizens of Armenia - they are in third place on this list. In first place are Ukrainians (17.6%) and second are Uzbeks (16.3%).

WikiLeaks writes: "In his dispatch 'We want to live now', the US charge d'affaires in Armenia, Joseph Pennington, points out: the grave economic situation, made worse by the world financial crisis, and political instability are boosting emigration from the country. Even successful members of the middle class are saying that they no longer have any illusions about Armenia's future and they do not believe that the country can become stable and prosperous. It seems that the disillusioned citizens, who were once devoted  to their country, have lost faith in their government showing any concern for their welfare or leading the country along the path to progress.

Foreign migration is having a direct impact on the reproductive behaviour of the population. Last year saw a slump in the birth rate by 3.1%. Mortality increased by 0.4%. The index for natural growth per 1,000 inhabitants was 4.7 per thousand instead of 5.2 in 2010. 

Armenia is growing older and these demographic problems are being reflected in the financial system: there are not enough social insurance payments to pay for pensions. In other words, the principle of continuity of generations does not apply because the present generation is unable to guarantee the prosperity of the older generations who are retiring.

Time to make conclusions

So, as we have seen, Armenia's economy is in a rather sorry plight despite continuing aid from Russia and Iran. In the past 20 years Armenia, having neither internal resources nor production potential, is living only on foreign aid - the Armenian diaspora, the patron countries of "long-suffering Armenia" and international organizations. Can such a country have a future?

What is the way out of this situation? To give up the fixed ideas about "a great Armenia from sea to sea" and territorial claims on its neighbours; to de-occupy the seized Azerbaijani territories. This will help to develop regional cooperation, for Armenia to take part in international projects, i.e. escape from the self-isolation she forced herself into.

Sober-minded Armenians are starting to realize the futility of the country's militarist policy and the lack of a future for such a policy. The question is when will Armenian society begin to realize the need for peace with their neighbours without looking back at the geopolitical interests of its "elder brother" and the crazy dreams of the Armenian diaspora living well in distant countries.

In conclusion, I would like to cite the words of Armenia's first president, Levon Ter-Petrosyan: "Those people who demand that the world recognize the 'genocide of the Armenians' are carrying out genocide in their own country. And it was not I, mark you, who said this but Charles Aznavour, appointed by Serzh Sargsyan as Armenia's Ambassador Extraordinary and Plenipotentiary to Switzerland."

AT FIRST HAND 

"Armenia is suffering and is being laid waste daily. Who benefits from this? A few mafia leaders? Thousands of unhappy people are crying out for peace. Nothing is being done here to help the people."

Charles Aznavour, French singer of Armenian origin