WB: Opening border with Turkey to boost trade and reduce transport costs
The reopening of the Turkish-Armenian border is expected to have a significant positive impact on the Armenian economy, with the direct impact initially through trade. Were the border to reopen, both countries would gradually establish greater trading ties as a result of easier market access and lower transport costs, head of the WB Yerevan's office Aristomeneh Varudakis told a PanARMENIAN.net reporter.
"If the border to reopen, both countries would gradually establish greater trading ties as a result of easier market access and lower transport costs," he said.
Armenia's exports are currently required to take a circuitous route through Georgia to world markets (about 2/3 of Armenia's trade is conducted through Georgia). One of the main benefits of the Armenia-Turkey border opening would thus be a reduction in transport costs due to reduced distance to markets and utilization of higher quality infrastructure, Mr. Varudakis said.
He stressed, that transportation costs to and from Turkey as well as other destinations could decline by as much as 10 to 20 percent thus increasing Armenia's exports to Turkey and also allowing Armenia to take greater advantage of the EU market.
According to the EU-funded study, in the short term Armenia's exports would increase by 5 percent (in value terms) and 17.7 percent over the medium term (over five years).
The open border and reduced transport costs would result in cheaper imports, thus increasing imports from (and via) Turkey. The EU study estimates a 4.7 percent increase in imports in the short term and a cumulative 13 percent increase over five years. Cheaper imports of final goods would lower domestic prices and help improve competition, thus providing an important boost to the standard of living of the Armenian population. Another positive impact would be cheaper intermediate inputs, which would further expand exports.
However, as Mr Varudakis mentioned, while Armenian consumers and exporters are likely to benefit, some Armenian firms producing for the local market could in the short-term feel stiff competitive pressures.
"If the border to reopen, both countries would gradually establish greater trading ties as a result of easier market access and lower transport costs," he said.
Armenia's exports are currently required to take a circuitous route through Georgia to world markets (about 2/3 of Armenia's trade is conducted through Georgia). One of the main benefits of the Armenia-Turkey border opening would thus be a reduction in transport costs due to reduced distance to markets and utilization of higher quality infrastructure, Mr. Varudakis said.
He stressed, that transportation costs to and from Turkey as well as other destinations could decline by as much as 10 to 20 percent thus increasing Armenia's exports to Turkey and also allowing Armenia to take greater advantage of the EU market.
According to the EU-funded study, in the short term Armenia's exports would increase by 5 percent (in value terms) and 17.7 percent over the medium term (over five years).
The open border and reduced transport costs would result in cheaper imports, thus increasing imports from (and via) Turkey. The EU study estimates a 4.7 percent increase in imports in the short term and a cumulative 13 percent increase over five years. Cheaper imports of final goods would lower domestic prices and help improve competition, thus providing an important boost to the standard of living of the Armenian population. Another positive impact would be cheaper intermediate inputs, which would further expand exports.
However, as Mr Varudakis mentioned, while Armenian consumers and exporters are likely to benefit, some Armenian firms producing for the local market could in the short-term feel stiff competitive pressures.
