Saturday, June 8 2019 01:07

ArmInfo. Patriotism, effectiveness, diligence and, as a result, an economic take-off: Here is the formula for the success of the Artsakh economy from the State Minister of the Nagorno-Karabakh Republic Grigory Martirosyan. In the interview with ArmInfo, the State Minister spoke about the ways of implementing this formula, the current state of the Artsakh economy and the prospects for its growth.

 

Mr. State Minister, how do you assess the economic situation in Artsakh, and what is the reason for the impressive economic growth rates in the republic for the recent 10 years?

 

The economy of the republic is developing steadily. On average, over the past 10 years, Artsakh’s economic growth has been calculated in double digits. This is largely due to the active investment policy, aided by the strategy of the government of the republic. In addition, we should not forget that the starting positions of the Artsakh economy after the war were very low, and the spasmodic growth was due precisely to the intensification of the post-war economy.

At this stage, Artsakh’s economy no longer needs help or assistance, it needs investments which will bring real financial dividends to investors. I should note that even against the background of long-term double-digit economic growth, we have not yet fulfilled our economic potential. In the medium term, we intend to maintain the minimum level of economic growth at the level of 8%. We still have great opportunities in such areas as energy, agriculture, industry and tourism.

And what impact have the recent political processes in Armenia and Artsakh had on the economic indicators of the republic?

I can say that we did not feel the impact of these processes. The figures for 2018 were quite satisfactory for us, the economic growth was 11.9%. The positive factor is that the structure of economic growth is diversified, that is, the indicators do not depend on the growth of some individual areas.

 

Mr. Martirosyan, you mentioned diversified economic growth, does it mean that all sectors of Artsakh’s economy began to develop evenly?

 

No, unfortunately, for now the mining industry continues to be the driving force of the economy, which provides 5.5% of economic growth, but in the future we intend to focus on the development of tourism and energy, and active steps are being taken to this end. In the field of energy, we put emphasis on the development of renewable energy, in particualr, hydroelectric stations and solar energy. We have major achievements in this field. For example, in the field of hydropower this year, we expect a 50% increase. In the field of solar energy, there are also potential investors from both Artsakh and Armenia.

 

You have mentioned the development of tourism, but there are serious political problems in this direction, I mean obstacles imposed by Baku, how do you intend to by-pass them while developing tourism?

Well, we are still going the standard way - we are developing the infrastructure, the hotel business is working on the affordability of service and financial services. We removed the state duty for a visa to Artsakh. All this gave its results, despite the “black lists” of the neighboring state, in 2018 the number of foreign tourists visiting Artsakh, excluding tourists from Armenia, reached 28.6 thousand, which is 23% more than in 2017. And in the first half of this year, compared to the same period in 2018, the number of tourists increased by 36%. We are also working through social networks to promote tourism in the direction of Artsakh, we also attract bloggers to this business. Speaking of foreign tourists, one should not forget that a vast number of residents of Armenia have never been to Artsakh.

You have stated that the government is focusing on the energy sector, what progress has been recorded in this direction?

The result was that in 2018 Artsakh first started to export electricity. In 2018, we produced about 405 million kWh of electricity, used 388 million, the remaining 20 thousand kWh were exported to Armenia. This year we intend to bring volumes of power generation up to 600 million kWh. In 2-3 years the output will be from 900 million to 1 billion kWh. This will not only bring economic dividends, but will also become an important element in ensuring national security.

 

In Artsakh, emphasis is put on the development of hydropower. But after all, the active development of hydropower has a downside, which is fraught with environmental problems, because the unique nature of Artsakh is one of the generators of tourism, so these are interconnected links of one economic chain. Is it possible that one sector of the economy suffers at the expense of the development of another?

 

You are absolutely right. But we do not close our eyes to the environmental aspect of the issue in the pursuit of energy. We have tightened environmental requirements during the operation of hydroelectric power plants, we conduct ongoing inspections. So the environmental aspect of the issue is in the center of our attention. We cannot allow one sector of the economy to develop at the expense of another.

Artsakh's previous government in economic development put an emphasis on the agricultural sector, as a result of which impressive growth rates were recorded. How are things going in this area now?

 

In the agricultural sector, we are now focused on the cultivation of high-value varieties, in particular, corn, sunflowers, because later it will stimulate the processing industry. In order to stimulate the peasants, we provide them with seeds for free. As a result, the area cultivated for these crops from 12 thousand hectares, this year will increase to 20-22 thousand hectares.

 

In addition, we put emphasis on the creation of drip gardens. Now mostly pomegranate gardens are developed. We intend to become the dominant supplier of pomegranates to Armenia. In one year alone, we increased the area of ​​drip-irrigated gardens from 400 hectares to 1000 hectares, and this year we will increase this figure by another 50%. As a result, we preserve the quality of the soil, we save water, we get an in-demand crop, which we will double or even triple over the course of 2-3 years. All this is achieved as a result of pursuing a flexible policy - we subsidize the peasants by 50%, the remaining 50% are provided via interest-free loans. It is noteworthy that Armenia has used our experience of the state  support in growing drip orchards.

The next stage in our programs is the development of the processing industry. However, in the development of the industrial sector, there are problems associated with exports due to the non-recognition of the republic. We have found ways out of this situation, but, nevertheless, the obstacles have a significant impact on the growth rate of the industrial sector. However, the development opportunities for the next few years are provided by the Armenian market. But later we will have to look for new markets.

 

Let's talk about the field of communications. The fact that the unrecognized republic has its own communication operator can be called unprecedented. Artsakh’s experience in this field has even been written in many authoritative specialized publications, however, Artsakh people often express dissatisfaction with high prices for communication services, and certain political circles in Armenia and Artsakh speculate on this issue, trying to put the work of Karabakh Telecom in reproach with the Artsakh government. Tell us how things are going on the communication market, is it expected that new operators will enter the Artsakh market?

 

After the protests against the activities of ''Karabakh Telecom'', Arayik Harutyunyan, while serving as state minister, sent written proposals to all three operators operating in Armenia, inviting them to the Artsakh market. But, for obvious reasons, we were refused. Nevertheless, following the results of difficult negotiations, we reached a consensus with Karabakh Telecom on the implementation of new investment projects, the purpose of which is to improve the quality of services.

 

What is the reason that foreign operators do not wish to expand their activities in the Artsakh market? In my opinion, the reason is obvious, but again, I would like to hear the answer from you in order to dispel the political speculations around this issue:

 

Well, of course, the main reason is political - foreign operators are afraid of expanding activity in unrecognized countries because of various sanctions and possible consequences. The second reason is purely economic - large companies are not interested in investing large amounts of money in small markets; this is unprofitable and unpromising for them. So, we have what we have.

 

Mr. Martirosyan, what are the new investment projects and in what directions are they being implemented in Artsakh?

Recently a shoe manufacturing enterprise has been opened in Artsakh. Currently, projects are being considered in the fields of energy, woodworking and the mining industry; a project for the construction of a new health resort is in the process of negotiations. Unfortunately, I can not yet disclose the details of these projects, we are still at the negotiation stage. But work to attract new investors and implement new projects does not stop. I can say that some investors are representatives of foreign countries, others from Armenia and Artsakh.

 

Насколько мне известно, с 1 июля текущего года Арцах также намерен перейти на накопительную пенсионную систему, есть ли отличия между накопительными системами двух армянских республик?  Мы параллельно с Арменией начали процесс имплементации накопительной пенсионной системы. В таких процессах мы стараемся шагать в ногу с Арменией, синхронно. Наши долгосрочные реформы нацелены на максимальную интеграцию различных систем двух армянских республик. И вот уже с 1 июля текущего года мы также имплементирует накопительную пенсионную систему.

As far as I know, starting from July 1 of this year, Artsakh also intends to switch to the funded pension system, are there any differences between the funded systems of the two Armenian republics?

In parallel with Armenia, we have begun the process of implementing the funded pension system. In such processes we try to keep pace with Armenia, synchronously. Our long-term reforms are aimed at maximum integration of the various systems of the two Armenian republics. And from July 1 of this year, we are also implementing the funded pension system.

In parallel, we are working on public information. Reform will be mandatory for both public and private sector employees. As part of the transition to the new pension system, we intend to reduce the 21% income tax by 1%, it turns out that with the introduction of the system, a citizen will pay only 1.5% more from his income.

The share of state co-financing in the implementation of the system, as in Armenia, will be 7.5%. In the process of co-financing, the state will have no problems, we have the appropriate means. In the budget of 2019, this amount is already provided.

 

As for citizens, I do not think that they will oppose, since the financial burden after the introduction of the system will be insignificant for them. In general, the budget of the reform, taking into account the payments of citizens and co-financing of the state, for the year will amount to 4 billion drams.

I should note that the system will work more harmoniously after the transition to the proportion of co-financing of 5% + 5% (state-citizen - Ed.note). With the current ratio of 7.5% + 2.5%, the system cannot work correctly, the logic is broken.

As in Armenia, the reform will affect citizens born after January 1, 1974. In general, the beneficiaries of the reform will be 26 thousand citizens. The ratio of beneficiaries to non-beneficiaries is about 50% to 50%. As in Armenia, part of the funds of the pension fund will be directed to the country's economy, and the funds themselves will decide to which particular areas the investments will be made.

Tell us about the resettlement and housing construction program, how is the implementation of these key projects for Artsakh progressing?

The housing construction program is a priority for the population and the government of Artsakh, since the housing stock of the republic is already outdated. Especially in Stepanakert, there is a great demand for housing, as a result of which the prices for apartments in the Artsakh capital are practically comparable with prices in Yerevan. Now the average price per square meter in Stepanakert ranges from 400 thousand drams. We set a goal to reduce the price to 280 thousand per 1 sq. m. This is the reason for the implementation in Stepanakert of two large-scale social programs, which provide for the construction of 500 new apartments. One program is carried out at the expense of bank capital, the other at the expense of foreign investors.

In the cities of Martuni, Askeran, and Shushi, construction programs are also being implemented, but already at the expense of state financing. But even the implementation of these programs will not be able to meet the growing demand in the real estate market. In order to satisfy this demand, we must annually have 2,000 new apartments. As for the mortgage lending, here we have adopted the experience of Armenia, part of the mortgage loan of citizens will be covered by income tax.

What is the reason for such demand in the housing market of Artsakh?

This is due to the increased financial well-being of citizens, and faith in tomorrow, and an increase in the number of people and an increase in the number of marriages.

And interestingly, the demand in the housing market is formed only at the expense of Karabakh people or, perhaps, citizens of the Republic of Armenia, representatives of the Diaspora, and why there are no citizens of foreign countries?

Basically, of course, the demand is formed at the expense of the Artsakh people themselves, but there are also families who have moved from Armenia, there are refugees from Syria. We need immigrants, especially in the liberated areas, in particular, Kashatagh, which is constantly developing through the creation of new industrial and energy facilities, there is always a shortage of "workers". Recently, the tobacco production was opened in Kashatagh, new hydropower plants are being built. Demand in the labor market leads to immigration. And, of course, there are many immigrants from Armenia. But the increase in the volume of immigration will be promoted by the intensification of housing construction, however, the Artsakh government cannot solve this issue alone, here it is necessary to consolidate the potential of the entire Armenian people. Nevertheless, we are still ready to accept immigrants, we have a shortage of specialists in the middle profile.

What is the demographic situation in the republic, what are the birth rates, are there any problems with emigration, as, for example, in Armenia?

Of course there is emigration, but it is not of a mass character. If we consider the natural and mechanical growth, then, in the aggregate, they are positive. Natural growth is definitely positive, mechanical indicators vary, but on the whole somersaults are positive. The population of the republic increases annually by an average of 1,000-1,100 people.

On this positive note, let’s finish our interview with the hope to hear new optimistic news from Artsakh: Thank you!