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Armenian PM Defends Economic Policies In Face Of Global Crisis

The Armenian prime minister believes the set of measures foreseen by the government will help Armenia cope with the negative consequences and minimize the impact of the continuing economic crisis in 2009.

Tigran Sarkisian said more investments in infrastructure development and several large projects to be launched by the state will provide new jobs for people to offset possible redundancies elsewhere.

"We should essentially increase our spending in such directions as infrastructure development, including road and housing construction, rehabilitation efforts in the [1988 Spitak] earthquake area, projects in the energy sector, irrigation and drinking-water-supply systems, which coupled with a drastic increase in lending to small and medium-sized enterprises will create new jobs," Sarkisian said in an interview with RFE/RL's Armenian Service last week.

"Besides we also plan to carry out several large projects that will provide essentially help in dealing with the consequences of the crisis," he continued. "These, in particular, include the construction of the north-south highway with the assistance of the Asian Development Bank, a program which has regional significance and is due to be carried out jointly with Georgia, as well as the construction of a new nuclear power plant, and the construction of an Iran-Armenia railway. All these programs also imply the creation of new jobs."

Sarkisian also referred to some international evaluations, including those made by Moody's International ratings agency, predicting stability for Armenia in the immediate future.

But he added: "All predictions made in the world today change every week and it is conditioned by the circumstance that the global financial and economic crisis is gathering new momentum and there is no methodology or institution that would be able to make precise predictions as to how long this crisis will last and what impact it will have on developing countries. So, I think it would be more correct if instead of spreading pessimistic sentiments, which by itself creates negative expectations and deepens the crisis, we should speak realistically."

Sarkisian concedes that Armenia is expected to end the year with a tremendous foreign-trade deficit, with imports exceeding exports nearly fourfold.

But he cited the example of the United States, which "in the past 28 years has imported more goods than it exported and by no means is among the world's worst economies."

"Naturally, Armenia has a very serious problem, that is, structural readjustments are taking place, a new structure of the economy is emerging, and we should be able to understand what the future of our economic system is and what structure our economy should have," Sarkisian said.

"Many dream of the day when we will have a strong machine-building sector, when we will manufacture and export goods like those in China or India. But I think all realize well it is not a future for us," he added. "Our strategy is to focus on an economy based on labor and intellect rather than materials, which means that we should primarily pay attention to the balance of payments, not the export of commodities, but the export of services, and carrying out economic activities not only in the territory of Armenia, but also in its worldwide diaspora."

The prime minister is hopeful that Armenia will manage to carry out successful reforms required for continued U.S. government aid under the Millennium Challenge Account.

"We have, indeed, made pledges to our own people to make these reforms, also in terms of forming a system of good governance. It is not a secret that we do have numerous difficulties, such as corruption, bribery, an ineffective governance system, low revenues, the presence of more than a hundred thousand socially vulnerable families, and we should overcome these difficulties also due to the Millennium Challenge Account program," Sarkisian said.

"We are extremely grateful to our American partners for the technical assistance that they have rendered to the Armenian government so that we can overcome all these existing difficulties," he added. "Therefore, we have developed a clear program, which has also been appreciated by the Millennium Challenge Account office. And the program of these measures has a timetable and people who is in charge of ensuring its proper execution."

Government Reforms

Sarkisian also rejected allegations by some government critics that in the past several months the central bank has reneged on its adopted "floating" policy for currency exchange rates and has sought to keep the national currency from depreciating against major world currencies with financial interventions on the foreign-exchange market.

"Our concept that we have developed together with the International Monetary Fund in 1993 implies that Armenia sticks to the so-called "floating" exchange rate policy for its national currency, which means that it is formed by the supply and demand existing on the market. We have remained committed to this policy and will stay committed to it in the future. We are not going to make artificial interventions in the formation of the exchange rate because it is fraught with many consequences," he emphasized.

Sarkisian also spoke in favor of creating equal conditions for competition in the agricultural sector, though he said this would not include protectionism. He also said that beginning next month, large agricultural enterprises will have to pay value-added taxes like enterprises in other sectors do.

"This strategy implies that agriculture, like in any country of the world, should also be taxable," he said, noting that the sector has been exempted from all taxes thus far.

The prime minister also reiterated the government commitment to fight corruption and stressed the role of the active engagement of civil-society organizations and opposition political parties in the anticorruption measures.

"That's why I urged all opposition political parties to have an active participation in our anticorruption program, in particular through monitoring, which is one of the key instruments," Sarkisian said, adding that this control will essentially increase public faith in the program and will raise its efficiency.

Rejecting Restrictions

Responding to the question about the state of democracy in Armenia in a year that has seen plenty of criticism from various international organizations of how Armenia has been handling its worst-ever internal political crisis, Sarkisian said: "Freedom of speech, democratic values do not imply that our country should be sliding into chaos. Freedom of speech is not arbitrariness. People should also have a sense of responsibility."

In particular, he responded to opposition claims that the authorities restrict its freedom of assembly by refusing to provide space for its political gatherings.

"We provide the government conference hall to organizations on a contractual basis and if so, the rules stipulated by the contract must be respected," he said. "We have added one point to our contract that if an organization fails to observe the rules, then it does not get the conference hall at the second time of asking. This is a democratic approach.... If we do not respect our word ourselves, no one will respect it."

Sarkisian also denied any political implications behind the parliament's decision to suspend the tenders for TV frequencies in view of the mandatory digitalization of broadcasting in the country. Government critics say the move is primarily aimed at preventing A1+, a television station critical of the authorities, from returning to the air after it was controversially pulled off in 2002.

Sarkisian said he regrets that the decision to postpone tenders for TV frequencies has become a matter of political speculation.

"All international organizations with which I have dealt with regarding this matter fully accept our reasons. Furthermore, we had no alternative to this decision," he said. "We could not announce a competition for two years because we have an international commitment to achieve digitalization in the broadcasting sphere and time should be given to the private sector to get ready for the tenders in which this transition that we must complete within five years should be considered."

The prime minister also disagrees that financial penalties against Bjni, a leading mineral-water producer, are in any way linked to its owner, pro-opposition lawmaker Khachatur Sukiasian, who has been in hiding since the start of the government crackdown on opposition members who backed to former President Levon Ter-Petrossian in the February presidential election.

"I do not agree that there is any political persecution in this case. But I agree that one must not be persecuted for political views, especially in the economic sphere," he said. "As for Bjni, it is obvious that the company made serious violations, evaded taxes. And I would want you to focus on this issue in the first place. Didn't it in fact evade millions in taxes? It is essential to answer this question and by answering it we will refrain from such political speculations.

"The exercise of tax control started a long time ago and it concerned not only Bjni, but also other enterprises, including those working in the same sphere. Such violations were found at many enterprises. But unlike Bjni those enterprises admitted their fault and fulfilled their tax obligations. Meanwhile, Bjni is trying to politicize the matter to avoid fulfillment of obligations that it has toward the state budget, which is inadmissible," the prime minister concluded.