Friday 23 February 2018 Last Update: 04:12 PM

Armenia Faces Industrial Collapse

Published: 11-09-2014


By Mushvig Mehdiyev

The industrial development rate in Armenia is about 5-6 times below than the same indicators it had during the Soviet era.

Head of the Union of Domestic Producers, expert Vazgen Safaryan said the latest records about tax payers in Armenia revealed the industry's miserable situation.

"The list of the top ten largest tax payers in the first nine moths of this year included only three manufacturers - Zangezur Molybdenum Combine, Grand Tobacco and Yerevan Brandy Plant. That's a real example of disastrous industrial regression in Armenia," Safaryan noted.

He added that the government forecasts about 17 percent share of industry in 2015 state budget, while the agriculture has a share of 18 percent along with nearly a 41 percent stake of the services. It testifies to economy's focus on consumption, but not on production.

"Let's compare the same indicators with the data during 80s years of the Soviet period. Industry covered about 68 percent of the gross national product, in the other words, it's share was amounted to nearly 9.2 billion rubles, which is equal to about $10-12 billion. Comparison shows a clear industrial decline by 5-6 times in independent Armenia," Safaryan said.

Armenia's industry mainly covers the manufacturing activities in the fields of mining, electricity, molybdenum, as well as in chemical products and gold production fields. Mining products share roughly 40 percent of the country's total exports. Widespread privatization and lack of government financing blocks the country to benefit from industrial facilities since many of them have already ceased operating. Unlimited privileges of the overseas companies, including the businesses from Russia, Britain, the U.S. and etc. make the country unable to control economic developments. American Contour Global company's full ownership of Armenia's largest Vorotan Hydropower Plant along with the British Lydian International's control over the gold production in Amulsar field portray the real image of the country's modern industry.

Nairit Rubber Plant in the capital city Yerevan played a vital role in Armenia's industrial life, but now it has turned into a real headache for the government. The authorities were forced to cease the plant's work in April, 2010 and leave some 2,261 employees with unpaid salaries. Then it decided to get rid of the Nairit "nightmare" by selling it to Russia's oil giant Rosneft. The two sides agreed the terms of purchase, but the economic crisis in Russia after western sanctions forced Rosneft to withdraw from business agreement.

Now, nearly $12.1 million loan from abroad will help the authorities to silence the outraged workers and solve the Nairit conundrum. Local Haykanak Zahamanak paper wrote that the source of the loan is kept secret, saying it is the first step taken under an unknown program developed by the government to resume the plant's activity. About half of the plant's employees will be dismissed, according to the paper.

The economic forecasts claimed that the external debt of Armenia reached $4 billion this year, exceeding the last year's figure by roughly $59 million. The 2015 state budget indicated that the country's total external debt will surpass $4 billion by the end of the next year. Every citizen living in Armenia shares nearly $1,500 of the total foreign debt.

Every country is like a family and both of them have leaders. Financial problems in the family is mostly solved by the father, as the government carries out the same mission for the country. Now, let's imagine that the father fails to give pocket money to his child and asks his neighbor to help him. The scenery is almost same with the Armenian government's request for the external money to repay the local workers' salary. That's the next tragicomedy developed by the Armenian authorities. Who knows, maybe the government of the small Caucasus country will claim the Nobel award in political literature for its "eloquent" tragicomedies.