The impending sharp rises in the prices of natural gas and electricity are calling into question continued robust economic growth projected by the Armenian government, Armenia’s leading business association warned on Thursday.
Arsen Ghazarian, the chairman of the Union of Industrialists and Entrepreneurs, also said that the authorities are still not doing enough to end privileged treatment enjoyed by some wealthy businesspeople connected to them.
The government committed itself to significantly reducing poverty and unemployment in the country in a five-year policy program approved by the Armenian parliament last week. The program forecasts an annual economic growth rate of 5-7 percent that will translate into more than 100,000 new jobs by 2018.
According to Ghazarian, a 50 percent surge in the price of Russian natural gas for Armenia, which was announced earlier this month, is raising questions about these economic targets. Armenian utility regulators said last week that they will likely raise the prices of gas and electricity supplied to households by 18 percent and 27 percent respectively in early July.
“Naturally, this will have a negative impact [on business,]” Ghazarian told RFE/RL’s Armenian service (Azatutyun.am) in an interview. “Our union is going to appeal to the government with a letter in which we will say that the pace of economic development could slow. The government’s economic program envisaging 7 percent growth and our export strategy could suffer quite serious blows.”
The price hikes would have been even sharper had the government not decided to subsidy the cost of gas imported from Russia. The government has also promised additional subsidies for low-income families.
In Ghazarian’s words, the Union of Industrialists and Entrepreneurs believes that the government should meet with representatives of the business community to discuss ways of rewarding private firms using alternative sources of energy or energy-efficient technologies. “Or else, our competitiveness and achievements in industrial policy will be at serious risk,” he said.
Armenia’s problematic business environment poses another serious challenge to steady growth. Two senior officials from the International Monetary Fund (IMF) warned earlier this month that faster economic development of the country requires “deep and swift” reforms that would end the privileged treatment of some businesspeople and improve tax collection.
The government program approved by the National Assembly a week later envisages “meaningful steps to separate business from politics” but otherwise sheds little light on the government’s reform agenda.
Ghazarian seemed skeptical about the program’s positive impact on the business environment. “What is it that does not make the public enthusiastic and spreads skepticism about the program?” he said. “People want to see a level playing field in business … We have dominant positions and abuses, a privileged status that results in disproportionate profits and leads competitors to ruin.”
The business leader, who owns one of Armenia’s largest cargo firms, said government efforts to improve the investment climate have not been sufficient so far. “There are some results but they are not satisfactory,” he said. “Efforts are being made but we do not see the kind of results that we want.”