Smbat Nasibyan: State approach can turn Armenian economy`s shortcomings into advantages

The founder of the "Converse Bank", a former member of the Council of the Central Bank of Armenia, economist Smbat Nasibyan, in an interview with ArmInfo continues to reason up  ( see the first interview) about shades and subsequent possible scenarios of the Armenian "velvet revolution". Analyzes the internal political situation in the country. He shares his own vision of Armenia's economic problems and prospects for their solution.

Mr. Nasibyan, the  first wave of euphoria due to  the Armenian "velvet revolution" seems to slow down. What threats and what opportunities are visible under it?

In  my opinion,  there was a more uprising and rebellion in Armenia, because we do not see any new ideas and clear programs and people aimed at their implementation. According to classics, revolutions divorce society from everyday life, destroy conservative institutions of power and elite, and give birth to new ideas. At the same time, often the revolution is destroyed not only by the ruling regime, but also by the state machine itself, down to the loss of statehood. In this light, the awareness and determination after the uprising of the real vectors of reforms, aspirations, the one around which we should mobilize its powerful positive energy, seems to be a necessity. We must understand that everything is not so simple and there are no simple solutions, that only a powerful statehood is the key to any fundamental changes and reforms. One of the models created after the revolutions is the establishment of democracy, the second is the replacement of the regime with a new kind of oligarchy, the third is the establishment of a revolutionary dictatorship. In the short term, before the early elections, none of these models are visible in Armenia. In this light, how we will hold these elections, what forces will participate in them and which ones will win is a matter of paramount importance. Here I see the danger of victory in democratic elections, particularly popular in rural areas parties that are fully capable of becoming a new oligarchy and establishing a new dictatorial or authoritarian regime. The second danger is the establishment of a revolutionary dictatorship. Another threat of return as the basis of old power or the creation of a new oligarchy . However, there is also the way to create a modern, effective state on the basis of a consistent, clear, realistic in terms of time program of a particular party. The program for which this party will have to be accountable to its constituents  . I'm afraid that this is perhaps our last opportunity, because our society and, consequently, the state cannot survive another disappointment

What are the main challenges   that  the new government is facing now?

The main challenge is the threat of a lack of ideas, because in this case they will inevitably be replaced by private interests, turning into a powerful factor of instability. Another important threat is the possible segmentation of reforms, still a monopolized economy. It is also necessary to note here the lack of energy resources. However, such a scenario is possible to prevent the state using its monopoly power right. Unlike the old illegitimate regime, the new Armenian power is endowed with a similar right, both legal and moral, by the society that supports it. In this light I refer to the quotation of the Norwegian economist, Professor Eric  Reinert : "Do not do what the Americans tell you, but do what the Americans did themselves." Any illegal actions and rallies in the US are suppressed in the most severe way, which does not prevent the State Department from severely condemning the suppression of anti-government protests in any other country. The US authorities stipulate this, its own trust based society, legitimacy, which, in fact, gives them the right to apply tough force in response to any violation of the law. Therefore, the rules of the game in Armenia should be clear and identical for all. Either for the oligarchs, and for the rest of society . And everyone should know that they will wait in case of violation of these rules.

And do not you see the threat of making decisions based on populist considerations?

Unfortunately, such a threat is already visible. Previous authorities have done some right steps towards the formation of the state. These include the creation of a funded pension system, an auto and medical insurance system, at least cameras tracking traffic violations. The whole problem was reduced to the use by the power of all these mechanisms for the purpose of own enrichment. In other words, all these mechanisms should continue to work, we just need to change the distribution vectors of the funds received. People should clearly know that these funds ultimately go to their own needs, should know that they are not being stolen.

The presence in the parliament of 58 Republicans, as if, is not the best help for all this ...

Indeed, on their part, unequivocally, there is a threat of sabotage of the government's activities. And to counteract this threat and express their distrust should not be by shouting under the windows of various threats, but by applying legal mechanisms to them. To do this, you first need to investigate how, in what way these people in general came to power, what traces they left behind in all these years. This is the only way and this path must be passed as quickly as possible, because citizens are waiting for results today. For example, it is necessary and possible to remove from the post of the Yerevan mayor so undesirable for society, and not through street pressure in the form of protest actions, but by elementary application of articlesfull of the law, and, with all rigidity. One of such criminal articlesfull is called illegal enrichment and may well be used against a state official-millionaire. I also have serious doubts about the conformity of the reality of tax returns of our officials, especially those who indicate borrowing as a source of their income. And here, exclusively within the framework of the law, a broad, truly unploughed field for law enforcement bodies of legitimate power opens up. The functions of managing the state, carried out by the former authorities, were too expensive for society. In my opinion, it is from 1 to 3 billion dollars of annual rent. Meanwhile, with proper involvement, these amounts will be sufficient, at least, to ensure the normal functioning of the state apparatus. I think that we just need to forget about the Republicans, because they have no representative potential anymore.

And, nevertheless, the Republicans are already trying to play on the inflated expectations of the society personally from  Nikol Pashinyan.  And all the propaganda machine, which is still at their disposal, is connected now to all this. What with, if not with populist decisions that new government can respond to this?

Our people were brought to the streets not by hunger, Armenians are a nation that is always capable of feeding themselves to some extent. People went out to the streets to find justice. Therefore, today they do not expect bread or spectacles from the new government, but expecting justice and equality of all and all before the law. They expect the rule of law over everyone and everything. For many years in Armenia, as a result of the trampling of human dignity, some were allowed what was not allowed to the majority. A handful of people, using the power given by the government, a privileged position, for years divided billions among themselves, leaving the rest of the population miserable crumbs. And today people expect the authorities to grant the right to reach this or that situation exclusively by their own forces to everyone, and not just a handful, conditionally elected. Accordingly, first of all, Pashinyan should root out the injustice based on the healthy mass of our society, which, in fact, led him to power. And the legitimate, heightened thirst of our society for finding true statehood should find its satisfaction in the form of a program approach of the new government. The society needs to be explained that this is the main task of the new government. And it is exactly  in this direction that it will work. People should clearly know why they will support Nikol Pashinyan in the future. To do this, they need to explain that decisions are made on a rational basis, and not because the government itself is intelligent and therefore can decide for them. For this, in turn, society needs to be presented  various solutions and their risks before they are taken.

Actually, Nikol Pashinyan is already doing this through, so severely criticized by some, ´´premier lives´´ ...

 This initiative of him  could only be welcomed. But this is not enough, since the Prime minister cannot be responsible for everyone, he cannot be an expert in all spheres. Speaking to the society, explaining  the  situation, prospects and risks should be the job of appropriate  specialists in all areas. The economy and governance of Armenia are inefficient and uncompetitive , the rent for this management is horrible. And to gain competitiveness even in relation to the rest of the EEA countries, Armenia can only through the path  of increasing the efficiency of the work of the government. This is where the huge potential lies. Unfortunately, it must dispel the great expectations of the society in terms of a sharp breakthrough in the economy. Even the authorities themselves have high expectations from external injections. Meanwhile, as in the foreseeable future, I personally do not expect a sharp increase in the inflow of investments. We can only expect investment inflow after establishing clear rules of the game, building a modern state with all its attributes and elements. States deprived of any manifestations of patronage management and  “clientism” . Today, many are talking about billions of investments , these are very large numbers of games that I do not really like.

In the Diaspora, as if, they met a change of government with great enthusiasm. What can you say about the aggregate investment potential of our compatriots, which according to some estimates is $ 500 billion?

In my opinion, it simply does not exist. As for $ 500 billion, if they exist, they certainly will not come to Armenia without having the necessary degree of protection. We must understand one simple thing - the Diaspora's money in no way differs from the money of any hedging  funds , investment companies, private investors. Accordingly, the conditions for allocating Diaspora investments also can not differ from the generally accepted ones. Therefore, in my opinion, the emotional background here is rather unnecessary, and the Diaspora will only provide Armenia with charitable assistance. And in this light, it is much better for Armenia to deal with large investment hedge funds that have the practice of investing in countries with high risks.

It is really long time that "Augean stables" need clearing . But thanks to the old authorities, they included, among other things, multibillion-dollar foreign debts. How do you imagine the solution of this issue? Only for servicing external debt each year several hundred million dollars are required and this amount will grow from year to year…

As of January 1, 2018, the total external debt of Armenia: the debt of the state - the Central Bank and the private sector, reached $ 10.5 billion. And this terrible figure only increased during the Karen Karapetyan's premiership by $ 1.3 billion. And the fact that the state accounted for slightly more than $ 6 billion of total debt - evidence of a significant increase in debts and, accordingly, the risks of the private sector, which causes serious concern. The state debt, respectively, consists of the GCO and soft loans granted by the IMF, WB, ADB, etc. placed on the free market. Somehow delay, refuse to pay on the debts of T-bills - approximately $ 1 billion Armenia can not because it will mean imminent default. However, we can try to agree with the international financial organizations on the program loans granted to Armenia. In the end, all these loans were issued for the implementation of joint programs and it would be very good again to sit together and evaluate the effectiveness of their implementation. And if it suddenly turns out that the former regime used these funds ineffectively, and even made "kickbacks" including creditors themselves, then it will be quite possible to try to give up responsibility for these funds. In the end, these institutions could not give these loans, and if they did, then at least keep their implementation under control.

Or at least to  try to divide it ...

Of course.  Under the most negative scenario, it is necessary to try to test and evaluate the effectiveness of a program, say "North-South" and in case of uncovered control by the ADB in this case, to demand restructuring. And this is only one of the possible models of restructuring.

 Evaluate the untapped potential of the Armenian economy. Which sectors could be developed today?

It is necessary first to make an overall assessment of the entire Armenian economy. First of all, to reveal its advantages over other countries . We have membership in the EAEU , we have a small, relatively educated, mono-national, fairly mobile population. There is a technical development, the Internet is distributed. After all, in Armenia it is safe and in some ways to live in Armenia more comfortably than even in France. Therefore, first of all, we should try to project all these advantages on the macroeconomic document and see what will come of it. Armenia is a small country and therefore it is relatively easy and effective to test economic projects with the participation of transnational corporations. In Armenia, it is easy enough to apply new technologies in a test mode, which can then be distributed in large markets if successful. Based on my cooperation with the French La poste, I can say that it is quite possible. In other words, we see that with the correct formulation of the question, our small market, an economy out of scarcity, may well turn into an advantage. However, only in one case - the manifestation of the state approach is literally in everything.  Armenia has, first of all, an appropriate human potential for this.