By Atom MarkarianHrant Vartanian, a wealthy businessman who owns Armenia’s two main tobacco companies, warned on Thursday that he will close down his factories and move them abroad if the Armenian dram continues to appreciate against the dollar.
“We are now making plans to move some of our manufacturing operations to Georgia and Russia in order to produce things there and import them to Armenia,” he told RFE/RL. “If the dollar continues to fall at this pace, we will resort to that step in the next four or five months in order to save our business.”
The dram has gained more than 30 percent in value against the dollar in the last two and a half years, significantly raising production costs of local firms dependent on exports. Vartanian’s Grand Tobacco and International Masis Tobacco firms not only account for much of cigarette sales in Armenia but also sell a large part of their products, notably fermented tobacco leafs, abroad. They employ more than a thousand people and but raw tobacco from hundreds of Armenian farmers.
Vartanian, who already co-owns a cigarette plant in Georgia, agreed with the widely held belief that the dram’s strengthening has benefited a handful of large-scale importers of fuel and foodstuffs that have close ties with Armenia’s leadership. “For local manufactures the effects [of the dram appreciation] will be very negative, while for importers it is a source of huge profits,” he said.
“Those companies that are mainly involved in exports and generate the bulk of their revenues in hard currency are experiencing difficulties and failing to meet their profit targets,” agreed Tigran Khachatrian, commercial director of the ACP copper giant, one of Armenia’s largest exporters.
Khachatrian complained that ACP is not only unable to raise its workers’ wages but is increasingly having trouble paying them. “Even if there are no pay increases, our expenditures on wages are constantly going up,” he said.
The Armenian Central Bank, which sets the dram’s exchange rate, argues that its main mission is to suppress inflation, rather than protect local exporters and jobs. It has said all along that the dram’s appreciation, which resumed last month, is a natural phenomenon stemming from an increased influx of dollars, most of them cash remittances from Armenians working abroad.
Opposition leaders and other government critics insist, however, the Armenian authorities have artificially boosted the national currency’s value in order to further enrich “oligarchs” involved in lucrative imports. The Central Bank, backed by the International Monetary Fund and the World Bank, has repeatedly dismissed such claims.