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When will Armenia’s business sector show progress?

“A smaller country may easier adapt to new conditions,” Deputy Director of Association of Russian Banks analytical department said.

Improvement in business climate may become possible through raising the level of property rights protection in the country to stimulate capital inflow and simultaneously reduce its outflow, according to Sergey Grigoryan, Deputy Director of Association of Russian Banks analytical department.

PanARMENIAN.Net - “Business goes where it feels comfortable. In Russia as in any post-Soviet country this problem remains urgent and requires solution,” Grigoryan told July 20 Yerevan-Moscow TV bridge on Capital Outflow; Post-Soviet Space.

According to forecasts, capital outflow from Russia will total $ 35 bln this year. The problem of capital outflow is pressing for neighboring countries as well.

The head of Alternative Armenian analytical center, Doctor of Economic Sciences, Tatul Manaseryan, in turn, added that if in Russia’s context billions are concerned, in Armenia even a million worth amount outflow has an essential impact on economy.

Moreover, if Russia encounters capital outflow, it is partially compensated by direct foreign investments inflow, whereas in Armenia the reverse process is ruled out, that is, capital inflow is, in fact, episodic, which is a problem for ensuring economic security of the country,” Manaseryan said.

Tatul Manaseryan and Armenian parliamentarian Manvel Badeyan forecasted improvement of economic situation in Armenia in the second half year of 2011 against the same period in 2010.

According to the parliamentarian, the economic growth repotted in Armenia does not mean much, having no firm foundation, as compared with the zero-growth of developed countries signifying a stable development. As Badeyan stressed, investments in human resources must be made a basis of Armenia’s economic development.

Mr. Manaseryan, in turn, expressed dissatisfaction over Armenia’s failing to fully use its potential. “It’s shameful that Armenia must be moving towards development at snail’s pace,” he stressed.

The independent expert stressed construction, manufacture and services among problematic sectors in Armenian economy.

A 2,3% growth in economic activity index in Armenia in June 2011 was reported as compared to the same period in 2010. According to the National Statistical Service, the economic activity growth was 9,6% higher in June compared to May 2011. Inflation amounted to 8,5% in June 2011 compared to the same period in 2010. Consumer prices reduced by 1,4% in June as compared with May 2011. The national budget envisages 4,6% GDP growth and 4% (±1,5%) inflation for 2011.

The main factor impeding improvement of business environment for both Russia and Armenia is political will, which Georgia proved to have enough, and was able to achieve progress in this field, according to Sergey Grigoryan.

The Russian expert pointed out existence of bureaucratic delays and availability of financing among other impeding factors.

Tatul Manaseryan, in turn, emphasized importance of maintaining the balance between rights and responsibilities on the way to progress.

“When rights are granted, responsibility must be assumed. Georgia punished those who failed programs,” Manaseryan said. The analyst stressed that high-ranking officials, including ministers and responsible officers must not be dismissed without estimation of their work results.

It should be noted that aimed at improvement of business environment Georgia’s authorities provide tax privileges for business. Georgia is ahead of Armenia and Russia in business registration rate. This allows stimulating development of both large and medium business.

According to Manaseryan, Armenia has just begun to talk about creation of free economic zones. “There are no monopolies in Georgia, oligarchs cannot ‘swallow’ small and medium business,” economist said.

Transport blockade is, certainly, an obstacle for development of business in Armenia and stimulation of investments inflow, according to Tatul Manaseryan.

However, neighboring countries being members of the World Trade Organization (WTO) violate rules and apply discrimination approach towards Armenia, Manaseryan said. It is not a secret that Armenia’s transportation costs on the territory of Georgia several times exceed costs for passing similar distances elsewhere. The expert said Turkey and Georgia signed a range of international conventions envisaging free outlet for landlocked partner countries.

Armenian banking system successfully managed to adapt to international standards, according to Sergey Grigoryan. “Based on its regulation, Armenian banking system is closer to Western standards than Russian one,” Grigoryan remarked. In this respect, Grigoryan noted that adapted International Financial Reporting Standards (IFRS) are already applied in Armenia, whereas Russia plans to implement them only in 2015. “This is one of visual examples of how a smaller country may easier adapt to new conditions,” he said.

Touching upon Armenian-Russian cooperation in the banking sphere, the representative of Association of Russian Banks underscored that presently assets of Russian banks in the Armenia’s banking system total $94 mln.

Victoria Araratyan / PanARMENIAN News
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