Economists predict huge boost for Armenian economy if ties between Yerevan and Ankara are normalised.
By Hasmik Hambardzumian in Yerevan (CRS No. 512, 25-Sep-09)
Economists have welcomed the progress Yerevan and Ankara have made towards normalising relations, anticipating it will open up vast new markets for Armenian producers.
There is currently a near-total blockade on Armenian goods going to Turkey. In 2008, according to Armenia’s National Statistics Service, less than two million US dollars worth of Armenia products were exported to Turkey, whereas more than 250 million dollars of Turkish goods were imported.
Correcting this imbalance could prove revolutionary for Armenia, which currently depends on exporting most of its goods to Russia via Georgia, since its borders with both Turkey and Azerbaijan are closed.
“A significant growth in the economy is expected, with an increase in the volume of exports and a growth in investment, as well as an improvement in the population’s living conditions,” said Mark Lewis, the head of the International Monetary Fund’s mission in Yerevan.
Armenia and Turkey have lacked diplomatic relations since shortly after Yerevan gained independence from Moscow. Ankara, in a mark of support for its allies in Azerbaijan, who were fighting Armenian forces for control of the region of Nagorny Karabakh, cut ties in 1993 and has not restored them. Armenians still rule Karabakh, and the Azerbaijan-Armenia peace process is mired in difficulties.
Armenia and Turkey, however, have made significant progress since the two presidents met at a football match between their national sides a year ago.
They issued two protocols at the end of August, pledging to sign them after six weeks of public discussion. Appropriately, the six week discussion period, which should end with the border being opened, is due to end just before the return fixture.
The initial meeting also featured a deal between the Turkish UNIT company and High-Voltage Electric Networks of Armenia to sell 1.5 billion kilowatt/hours of Armenian electricity to Turkey. The size of the contract is a clear sign of the potential for cooperation.
Harutiun Khachatrian, an economic analyst from the Noyan Tapan agency, did not believe the official explanation for why no electricity has been sold so far. Officials say technical complications have prevented progress being made, but Khachatrian said its failure was linked to the progress of the peace talks.
“The fact that the project is not yet completed is obviously political,” he said. “You cannot even imagine how beneficial this cooperation will be for Armenia. Completely new possibilities will be opened, joint ventures will appear, products will be exported.”
Some economists have predicted, however, that the businessmen who currently dominate the Armenian market will object to the border with Turkey being opened, since it would let in a flood of competing products and services that could well undercut them on price.
Few of the so-called oligarchs Armenian have actually expressed a negative opinion of the peace process, with just Hrant Vardanian, president of the tobacco and confectionary company Grand Holding, being quoted in April as saying he looked on it “without particular enthusiasm”.
“The opening of the Turkish border means an end to monopolies. This is a significant step,” said Hrant Bagratian, a former prime minister and an economist by training.
Bagratian said some reluctance to open the border to competition from Turkish operators was natural, since Armenian businesses have faced little competition since independence.
He said Armenia just had to exploit its strengths, and trust its producers to become efficient enough to combat Turkish competitors.
“Whatever they do in Turkey, they won’t have the same harvest of tomatoes, apricots and grapes that we have and in this sense, I think the opening of the border won’t do much harm to our farmers. It’s possible that there will be a temporary shock, but within one or two years we will see that we have good chances for development,” he said.
Other businessmen agreed that Armenians should not be concerned, and should just rely on their country’s natural advantages. Besides the agricultural sector, the energy business, for example, is one where Armenia has a clear advantage, thanks to the Soviet legacy of decent infrastructure.
“With the correct implementation of international standards, there is no cause for concern, since in Armenia the industrial base, the infrastructure and the workforce are cheaper than in Turkey, where there are high salaries. It is necessary to occupy ourselves with increasing the productivity and efficiency of our production methods,” said Gurgen Arsenian, founder of the Arsoil company.
Hasmik Hambardzumian is a correspondent from www.panorama.am. IWPR country director Seda Muardyan contributed to this report.