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IMF, World Bank See Quick Impact From Turkish-Armenian Border Opening


The International Monetary Fund (IMF) logo, Washington, 05Apr2007

The International Monetary Fund (IMF) logo, Washington, 05Apr2007

The International Monetary Fund and the World Bank have reaffirmed their strong support for the reopening of the Turkish-Armenian border, saying that its positive impact on Armenia’s recession-hit economy could be felt as early as next year.

Senior officials from the two multilateral lending institutions welcomed economic implications of the unprecedented thaw in Turkish-Armenian relations which will result in the signing of key fence-mending agreements between Ankara and Yerevan later this week. Speaking to RFE/RL on the sidelines of the ongoing IMF and World Bank meetings in Istanbul, they said that growing signs of economic recovery around the world should also reflect positively on the economic situation in Armenia.

According to the latest IMF projections presented during the global forum, the Armenian economy will grow by 1.2 percent next year after enduring one of the steepest declines in the world this year. The World Bank also expects renewed modest growth in the South Caucasus country in 2010.

Ratna Sahay, deputy director of the IMF’s Middle East and Central Asia Department, said the growth rate could well be higher if the Turkish-Armenian frontier is opened for commerce and travel soon. “Once the border opens up we think that the impact would be pretty quick because it would reduce [Armenia’s] transportation costs tremendously,” she said. “There would also be a lot of indirect impact through trade in goods and services with Turkey.”

“I don’t know if it will happen in 2010,” said Indermit Gill, the World Bank’s chief economist for Europe and Central Asia. “But my sense is that [positive effects of border opening] can happen very, very quickly because there are entrepreneurs on both sides that are very keen to take advantage of business opportunities on the other side of the border.”

“What we find is that countries that are globally integrated tend to be also pretty regionally integrated as well,” said Gill. “And both of these integrations are very good things. Countries that are more integrated tend to converge faster to higher income standards.

“So I think these are very positive developments, and if you want to see a whole body of evidence of why this is a good thing you should actually look at Western Europe, which was a very divided neighborhood not so long ago. Now it’s the most integrated neighborhood.”

Both officials emphasized the fact that Armenia is a landlocked country with high transportation costs that hamper economic activity and badly needed foreign investment. “Therefore, to have access in terms of transportation through Turkey would be of great benefit to Armenia,” said Sahay. “At the same time it would also benefit Turkey in terms of cross-border trade and tourism.”

The IMF official said an open border with Turkey would also make Armenia more attractive to foreign investors. “Armenia has a lot of advantages vis-à-vis the level of education and skills of the Armenian people,” she argued. “There is also, of course, a big Armenian population that is outside, which is also going to be looking to see how opportunities in Armenia are going to expand. So provided that the policy environment is good, the opportunities to me seem quite a lot.”

That border opening would lower the disproportionately high cost of shipping cargos to and from Armenia is accepted by many local businesspeople and analysts. But just how quick and positive its impact on the economy as a whole would be is a matter of contention in the country. Some Armenian economists believe that it would take years before the country starts reaping tangible benefits.

Some local political groups, notably the opposition Armenian Revolutionary Federation, claim that an open border with Turkey would actually hurt the economy. They say it would flood the domestic market with cheap Turkish consumer goods and thereby hurt many Armenian manufacturers.

President Serzh Sarkisian is at pains to allay such fears as he is trying to build public support for his policy of rapprochement with Turkey both in Armenia and its worldwide Diaspora. Addressing his advisory Public Council on September 30, Sarkisian said that cross-border commerce with its arch-foe is more of an opportunity than risk for Armenian businesses as it would open a new and much bigger market to them. “Turkey is a member of the European customs union and the World Trade Organization,” he stressed.

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