DC conference on Armenian economy

First published in May 24, 2008 Armenian Reporter.

Political will, expertise needed for Armenian economic progress, experts say at AIPRG conference in Washington
Economists, others discuss corruption, dram appreciation
by Haik Gugarats

WASHINGTON – Unfair business practices continue to hurt Armenia’s consumers and the country’s overall economic competitiveness, international economic experts said at an annual conference organized by the Armenian International Policy and Research Group (AIPRG) on May 17–18 at the World Bank.

Saumya Mitra, the Bank’s lead economist for Europe and Central Asia, while remaining upbeat about Armenia’s economic progress, noted that shoring up Armenia’s global competitiveness required both the political will and technocratic leadership to address the shortcomings in economic structure.

In January 2006 remarks, Mr. Mitra had dubbed Armenia the “Caucasian Tiger,” likening its economic performance to that of the high-growth non-petro-states of Southeast Asia; the term was also used as the title of a World Bank book on Armenia.

“Caucasian Tiger” stifled by unfair business practices

“Competition in Armenia has been distorted by monopolies and informal restrictions,” said Mr. Mitra, linking them to a culture of “deepseated corruption,” as well as an absence of strong conflict of interest laws and antitrust institutions.

The World Bank economist believes that Armenia’s new president, Serge Sargsian, and his government recognize these shortcomings. But, he added, in addition to their focus on fixing tax and customs agencies, a more comprehensive policy was needed.

The new government’s program, approved by the National Assembly on April 30, incorporates provisions for enhancing Armenia’s competitiveness, creating a level playing field for all domestic businesses, and a more effective approach to tackle corruption, including passing conflict-of-interest legislation.

A paper presented by the International Monetary Fund (IMF) economists Nienke Oomes and Fernando Goncalves and Gohar Minasyan of Boston College revealed the impact unfair practices had on consumer prices.

Noting that normally currency exchange rates should have a direct proportional impact on domestic consumer prices, and dram appreciation should in fact result in a
proportional lowering of prices, the IMF economists found that this was frequently not the case in Armenia.

The paper noted that “the asymmetry cannot be reasonably explained by transportation costs. A more coherent explanation is that it results from monopolistic practices in the import sector, which is able to increase prices as the exchange rate depreciates and keep prices high when the exchange rate appreciates.”

Impact of dram appreciation

The Armenian dram appreciation, widely criticized in Armenia and especially in the diaspora, has on balance been welcomed by World Bank and IMF economists.

While recognizing the impact appreciation has on remittances as well as exports, Dr. Mitra said that the process itself reflected real productivity gains in the economy.

The link between growing productivity and appreciation of dram was also noted in the IMF paper presented by Dr. Oomes, the IMF’s resident representative in Armenia.

The IMF paper also concluded that the real exchange rate has in fact reached (or slightly overshot) its long-term equilibrium.

[A less scientific Armenian Reporter survey published on April 19, 2008 on p. 21, also found that a majority of experts queried believe that the dram’s appreciation relative to foreign currencies has reached a plateau.]

Armenian think tank in its sixth year

AIPRG was founded in 2002 by Washington- area Armenian economists and public activists and has since attracted institutional support from the World Bank and the Armenian government. AIPRG’s Advisory Board includes Prime Minister Tigran Sarkisian, who joined it while serving as chair of the Central Bank.

Armenia’s current economy minister, Nerses Yeritsian, is an AIPRG executive board member and one of its founders. Mr. Yeritsian joined the conference via video link from Yerevan, encouraging analysis and criticism of his government’s policies.

The two-day conference also included sessions on U.S. aid programs in Armenia, the role of the diaspora, developments in economic sectors such as IT and tourism, and involved a range of economists from the United States and Armenia.

AIPRG is co-led by a board which includes the World Bank’s Konstantin Atanesyan, the IMF’s Armine Khachatryan, and Nicole Vartanian of New York City’s Hunter College. This year’s conference was chaired by Dr. David Joulfaian of the U.S. Department of Treasury.

connect: www.aiprg.net

—Emil Sanamyan contributed to this story.

Briefly: Congress, PACE to hold Armenia hearings; Rice downbeat, then upbeat on Karabakh

First published in April 19, 2008 Armenian Reporter.

Washington Briefing
by Emil Sanamyan

Armenian politics discussed in Washington…

Representatives of the U.S. and Armenian governments, as well as the Armenian opposition were to testify in a specially convened congressional hearing on April 17 titled “Armenia after the elections.” (A report from the hearing will appear in the next issue of the Armenian Reporter.)

The Commission for Security and Cooperation in Europe, which includes members of both the Senate and the House of Representatives and is also known as the Helsinki Commission, will hear testimony from Deputy Assistant Secretary of State Matt Bryza, Armenian presidential aide Vigen Sargsian, and College of William & Mary professor and former Armenian Foreign Ministry official Arman Grigorian, testifying on behalf of ex-President Levon Ter-Petrossian.

Earlier this year, the commission co-chaired by Rep. Alcee Hastings (D.-Fla.) and Sen. Ben Cardin (D.-Md.) held a hearing on Georgia’s elections in a similar format. On March 3, following deadly clashes between police and rioters in Yerevan, both Rep. Hastings and Sen. Cardin issued statements calling for restraint and dialogue as a way out of the crisis.

On April 14, the Washington office of the Radio Free Europe/Radio Liberty (RFE/RL) held a discussion on Armenia and Georgia. RFE/RL contributor Richard Giragossian argued that “the post-election crisis or confrontation [in Armenia] is by no means over.... The underlying dissent and frustration and dissatisfaction among the Armenian public has little avenue for expression, especially in terms of [media] outlets.”

Georgetown University’s Cory Welt painted a somewhat more upbeat picture of developments in neighboring Georgia, suggesting that if “in November [2007] the question was whether Georgia is sliding towards authoritarianism, now it’s whether it is sliding towards democracy.”

…and in Strasbourg

Discussions of Armenia’s post-election crisis took up much of the April 14 plenary session of the Parliamentary Assembly of the Council of Europe (PACE) convened in Strasbourg, France.

In his report, British Member of Parliament (and former deputy prime minister) John Prescott, who led the PACE delegation to observe Armenia’s February 19 presidential elections, reiterated its key finding that the poll was “basically in line with Council of Europe standards,” and he sounded critical of the Armenian opposition’s tactics.

The report elicited criticisms from Swedish and Hungarian members, who focused on incidents of fraud during vote counting and post-election violence, respectively. In their turn, members of French and Turkish parliaments, who also served as observers, generally endorsed Mr. Prescott’s conclusions.

The most vociferous criticism of the election came from members of the Azerbaijani delegation, who demanded that the PACE be tougher on Armenia. In a rebuttal, Mr. Prescott dismissed Azerbaijani arguments as “absolute rubbish.”

Members of the Armenian delegation Armen Rustamian (of the coalition-member Armenian
Revolutionary Federation) and Raffi Hovannisian (of the opposition Heritage party) presented their views.

PACE was set to continue its discussion on April 17, when it was also expected to propose a set of recommendations to Armenia with regard to its political situation.

Secretary of State takes upbeat line on Karabakh peace

“I am very much of the view that the Nagorno-Karabakh issue is one that could be resolved, and actually, with just a little bit of will, could be resolved relatively quickly,” Secretary of State Condoleezza Rice said on April 15, appearing to contradict her own assessment a month ago.

In congressional testimony on March 12, Dr. Rice acknowledged, “in the immediate future I don’t know that Nagorno-Karabakh can get solved.”

But in response to a question from the American Turkish Council (ATC) conference audience this week, Dr. Rice said that the Karabakh peace agreement “is just going to take taking a couple of difficult decisions and getting an agreement between Azerbaijan and Armenia on Nagorno-Karabakh.”

The question came following Dr. Rice’s address at the ATC’s 27th annual conference, held in Washington, in which she touted the importance of U.S.-Turkish relations, compared Kemal Atatürk to Thomas Jefferson, and sought to avoid commenting on the dominant issue of the day in Turkey: the secular-military establishment’s effort to ban the ruling party through a constitutional court ruling.

Dr. Rice promised continued U.S. assistance to Turkey’s fight against Kurdish rebel forces and encouraged the lifting of Turkish penal code provisions that “criminalizes insulting ‘Turkishness.’”

ATC, which is funded primarily by major U.S. weapon systems manufacturers with contracts in Turkey, is a central element of the Turkish lobby in the United States. It is chaired by retired Gen. Brent Scowcroft, national security advisor to former President Bush and onetime superior of Condoleezza Rice. Turkish government delegates at the three-day conference included state minister Kursat Tuzmen and defense minister Vecdi Gonul. (For more information, see www.the-atc.org.)

Coming up…

The Armenian International Policy Research Group (AIPRG) will hold its annual conference on May 17–18 at the World Bank in Washington. The conference, supported by the Armenian government and sponsored by the World Bank, United Nations Development Program, and U.S. Agency for International Development, will focus in Armenia’s economic competitiveness in the global market. Connect at http://www.aiprg.net.

—Alexa Millinger contributed to this week’s Briefing.