Friday, 2 April 2010
“Armenian talk companion”
Exclusive interview with RA Prime Minister Tigran SARGSYAN
- Mr. Sargsyan, as you accepted to hold the post of head of the government, you were well aware of the problems in need of solution. Did you really not have any doubts in your soul?
- First of all, note that any statesman feels happy to have the opportunity to serve one’s own people on this post. When the President of Armenia offered me this post, I quite naturally took it as a sign of trust and at the same time as an exclusive opportunity for myself. Grateful to the President, yet I owe it to the fate that I have been given the chance of holding this post.
Corruption is our most serious illnesses.
- This is not a secret: it is much talked about both at home and abroad. Corruption is a serious handicap to Armenia’s economy. Moreover, it slows down the pace of economic development. What did you start from and what are your expectations?
- Firstly, I do agree that corruption is a serious evil to public life. It interferes with the normal development of our nation, deforms both social and economic-political relations. Unfortunately, this phenomenon is commonplace and inherent first of all in transition societies, as well as in such societies as face the challenge of poverty. People want to solve in a flash the economic and social problems and often abuse their service position.
The State does not have the possibility to sharply raise living standards in the country so that people could live on own their income. This economic and social situation creates serious preconditions for the development of corruption. We should take into account that this illness exists and if we want to move forward more effectively, it is necessary for us to carry out such actions and programs as may minimize or localize it. And only by constantly narrowing the circle of corruption we can liquidate it at all
.
- What is being done to that effect?
- Cooperating with both the international organizations and civil society, we have developed a complex anti-corruption program during the last few years. We have tried to give a complex decision to the problem. However, later on it became obvious that there is no such sphere of public life where changes were not needed. It turned out that the struggle against corruption is a systemic problem. At the same time, we realized that this was the foe number one in our anticorruption program. Because it is a voluminous document covering tens of various actions in each sphere. International experts, too, advised us to correct the program prioritizing some key tasks and highlighting them as top objectives. It will promote appreciably to the further course of struggle against corruption. Moreover, it can create corresponding moods and involve society as well. Together with the international experts we are now trying to identify these stresses.
Members of Government and Parliament should not be engaged in business
- Business in Armenia is spliced with the system of the government. Does this not imply serious resistance to the fight against corruption? How are you going to overcome it?
- I agree: one of the major attributes of corruption is the public-private fusion not for the sake of public interests, but rather for one’s personal interests. We are trying to solve the most important task, namely the members of government, MPs, other officials should not be engaged in business. If they own property or a business, they should hand over the management thereof to other persons in taking up a public office. At the same time they should constantly report to the public on their business activities to demonstrate that their own business cannot affect the decisions made by them. A bill is already submitted to the National Assembly providing the application of the institute of conflict of interest. A commission on ethics is to be set up to supervise the process of income and property statement for high-ranking officials. Declarations should be open and in public. A uniform register will be created. I feel it will put a strong check on corruption risks.
- Poghos will be replaced by Petros to come back to Parliament …
- In any case risks will decrease. It is different when you are an MP or when you hire Petros for service in Parliament. The Petros-Poghos denominated diversification helps reduce corruption risks. On the other hand, the possibilities for public control may increase in this way.
Middle class: the most responsible citizens.
- According to some estimates, more than half of national property is in the hands of a few people and families. Isn’t it a serious threat to national security?
- Unfortunately, there is social polarization in our country. In general, this is a threat to economic and public life. Therefore, a major task of ours is to form the middle class in Armenia. There are some hundreds or approximately one thousand families which live very well, and there are thousands and thousands families (115 thousand according to our estimates) with very low living standards. This is a serious impediment to the development of our country. In addition to the social and economic dimension, it has a political component either.
I am convinced that it is impossible to build a democratic and civil society without the middle class. This medium layer should consist at least of several hundred thousands of households. They are the most responsible citizens who actively participate in any election and weigh heavily on political development in the country. They vote for one or another party or a certain candidate based on their own vision. They take critical decisions as they realize that their future may depend on their own choice. By the way, this thesis was put forward by Hegel who believed that only propertied citizens should have right to vote. Very dangerous are those people prepared to vote for such candidates as promise to take away property from the rich and distribute it among the poor. SME development, too, is of paramount importance to our country.
The problem of trade fairs: the State under threatening clouds
- Perhaps, one should view from this very perspective the statement you made about the importance of small and medium-size enterprise as you assumed the post of Prime Minister? Though SME owners seem to be dissatisfied most of all - they are taking to the streets and appear to have some problems.
- I cannot agree with this positive comment of yours. Thousands of small and medium-size enterprise owners seem to be quite optimistic about the results of 2009. About 32 thousand managing subjects have been provided with serious tax privileges. The VAT threshold is raised from AMD 3mn to 58mn. This is crucial: tax return formalities have been considerably simplified with greater intervals allowed for their submittal. Twenty control entities were forbidden to carry out checks and inspections with small and medium-size enterprises. This trend will be maintained: we implemented a dozen actions to that effect in 2009 alone. As a result, the State fell short of some billion drams in revenue, but this was a strong boost for SME stability and activities. Nonetheless, I do admit to have failed to address the whole range of those the problems faced by small and medium-size enterprises. First of all, I mean the trade fairs. Figuratively speaking, they are a kind of thunderclouds threatening the State.
Insufficient attention was paid to the fact that over 70 percent of retail trade was carried out through the system of trade fairs. Large businesses could conceal the true volume of sales thanks to the system of fixed payment. At the same time, it was a serious handicap to the competitiveness of those shops working in the lawful field. As a matter of fact, the State forced shopkeepers to go to the fairs and open their own outlets over there. There is no other such country in the world where about 75 percent of trade is carried out at fairs. Things stood in a very absurd way with the trade fairs selling jewelry, radio-electronic devices and so on. Note again that the trade fairs used to make fixed payments to the treasury..! This kind of situation may undermine the foundations of our economy: it is a fundamental issue and should be dealt with immediately.
At the same time, it seems to be obvious that trade fairs gave employment and a living to thousands of households. Our strategy is to spare these people and their incomes. We attempted to shift the burden on market owners. Therefore, we asked them to come under fiscal control. Obviously reluctant to give up making huge profits, market owners were supposed to try to shift the burden back on individual traders. We will do everything to prevent it. Of course, they can mislead people by taking them to the streets in protest against the government.
The rich are disliked in poor countries
- It is too sad that people do not like the rich in our country. What should be done to ensure that the national bourgeoisie lives up to people’s expectations? And also, why are we so slow to move on to the system of progressive taxation?
- The rich are disliked in poor countries as they are thought to have resorted to illegal ways of making a fortune. At the same time, the experience of developed countries shows that the rich should assume social responsibility for the situation in the country. This means that they should first of all be transparent in their dealings by giving the public sufficient evidence of their lawful activities. In this way, they will be seen in a favorable light, and people will come to understand that they can get richer by honest work in this country.
As to our country, it is true that the rich do not make much effort to prove that they are fair and just, and not in words, but rather in deeds – through public accounts certified on the part of specialized organizations. This will enable the public at large to supervise the rich. Besides, the tax authorities will see whether they comply with their fiscal liabilities or not.
Secondly, rich people should share out part of wealth to society by implementing welfare programs. In this case, an atmosphere of cohesion and solidarity will reign in the society.
Thirdly, in a country overwhelmed with big poverty problems, the rich should be moderate in spending and refrain from making a showcase of their wealth so as not to cause the fury of people.
More capital investment is coming to Armenia
- Today we can witness some outflow of capital from the country, even quite a serious outflow according to some estimates. Is this not an indication of mounting concerns? It is a well-known fact that a business-friendly environment is first of all characterized by the citizens’ willingness to invest in their own country.
- The outflow of capital is overestimated in both the fact and volume. It is rather a political speculation. Anyhow, the amount of money invested in Armenia overwhelms that of capital flight. By the way, investing abroad should not be deemed as a crime or waste of national wealth. I cannot agree with such an approach. Any businessman may diversify the business portfolio to ensure favorable conditions for risk management. It can also benefit the country as a whole. Eventually, we have been inviting our foreign compatriots to bring in and invest money from abroad to keep it safe from various risks. Many just did so by moving in part of their business or by acquiring real assets in Armenia. This is a common practice in the modern world, and we cannot shut the financial borders asking people to do what is not at all rational. Instead, we must boost Armenia’s attractiveness to foreign investors as much as possible.
- I would not say you are a “happy” prime minister: your tenure all the way was marked by the negative impact of the global crisis which prevented you a lot from the accomplishment of the planned programs?
- The first blow came during the war between Georgia and Russia in August, 2008, which exposed the vulnerability of our economy and forced us to reconsider the logistical aspect of our economic doctrine. It was a great handicap in the eyes of foreign investors. Numerous programs were suspended and many investors gave up the idea of getting involved in Armenia at all.
The second blow came from the global crisis of course. As repeatedly stated, we were prepared to the financial crisis. We did not have any trade bank-associated problems unlike say Russia, Ukraine, Kazakhstan, the Baltic States where banks lost billions of dollars. In fact, the first tide of the global crisis bypassed Armenia. But we were unable to withstand the second tide coming from the real sector which made felt itself when the prices of raw materials (copper, molybdenum) experienced a sharp decline on the global markets. Tens of million dollars proved at stake. Then the impact was felt in the sphere of capital construction at the rate of 30 % of GDP after which the sector faced a bad shortage of investments. This is just how the crisis came to Armenia.
- What was the most vivid evidence of inadequate economic diversity in Armenia?
- This is a fact acknowledged by everybody. International experts unequivocally state that we must diversify our economy lest we should face the collapse of the whole economic system in case of sporadic failures.
Foreign indebtedness...
- Armenia’s foreign indebtedness is sharply up. According to some estimates, foreign debt service will be consuming about 20-30 % of budget resources within a few years. Is it not a deadlock?
- Such conversations are not new. When the State was borrowing money, many argued that we were intent on tackling today’s problems at the expense of future generations and so on. But the very purpose of external debt’s existence is to cope with current challenges in anticipation of future growth. The debt will be repaid as soon as we usher in a stage of growth. Any household is supposed to do so amid hardship. Hence, we should not be scared of borrowing money. Instead, we should think of how to spend it. As a matter of fact, we resorted to borrowing first of all for creating a more favorable environment for development of economy. 400km-long road sections were built in 2009, including rural roads. Roads are the key economic development as they provide direct liaising between settled areas. We have also constructed several hundred kilometers of drinking and irrigation water-mains. Either they can favor economic growth in the country. At the same time, we sharply increased the funding of small and medium-size enterprise.
The situation with farm product sales is still uncared-for
- As soon as the crisis emerged, you said it might be used to get right past mistakes. Moreover, it might be used to ensure spasmodic development of economy. What do you think of it now, or is there any progress in this respect, or what prerequisites are being shaped to that effect?
- As stated above, the first task is to stimulate small and medium-size enterprise in the country. Much has been done, but we have to do even more in this area. Efforts must be continued. As early as 5 years ago, information technologies were acknowledged to be a priority for the government. In spite of 14% overall decline in economy, we could boast 17 % growth in sphere of information technologies in 2009. New IT enterprises are emerging.
The IT sector proved having a string resource of resistibility. It is quite an encouraging fact as the share of information technologies in the GDP is comparable to that of mining industry.
Farm produce processing is our second priority. Things have been going too slowly in this field. Farmer support in the form of eased tax burden used to be the center of my government’s attention. Nevertheless, domestic agriculture will not expand unless Armenian farmers are provided with predictable schemes of sales. They are currently facing serious bottlenecks in this area with underdeveloped infrastructures and lack of adequate investments.
The most serious project underway now is the formation of a logistical platform on the basis of Zvartnots airport’s free economic zone. International organizations will come to buy wholesale Armenian agricultural production. Refrigerators will be available on the spot, laboratories operational to check product quality. Logistical schedules will be used to organize sales, warehouse products and so on I think this project will give a serious boost to the development of agriculture. Animal husbandry, too, will enjoy new export opportunities and new sales markets. This will help increase incomes and investments in the prospective areas of activity.
The State and the manufacturers of cheese have set up an exporting enterprise. Some 500 small and medium-size manufacturers of cheese can exercise product quality control, packaging and delivery with the help of this specialized entity. We are going to establish a similar structure for export of other kinds of agricultural produce.
We have developed programs on modernization of those enterprises engaged in the processing of nonmetallic raw materials. There are also some other projects aimed at promoting Armenian exports.
Nationwide network - Armenian world
- Let us move on to another area. You used to say that the crisis may be seen as an opportunity to return to one’s roots.
- Yes, we should shift to another plane of thinking. There is a methodological thesis which states that development is impossible without crises. It concerns both people and societies. Any crisis exposes one’s failures and shortfalls by killing the weak and opening new spaces for the development of the strong.
- Mr. Prime Minister, as you published your article entitled “The end of the State” you may have been expecting a heated debate on the matter. Did they happen?
- There have been some closed discussions and tens of seminars organized. Why closed? Because only those people well-aware of this issue could take part in such discussions. Publications and conversations in the political field were superficial, chiefly concentrating on the article’s heading rather than on its contents. After noting the statements of some deputies, I realized that not only had many of them missed the point, but they had not even read up the article. Because only in the closing part of the article it was stated that the name had provocative character.
- You have found an excellent key: the fact that Armenians are scattered worldwide is the key to the creation of a nationwide network that you called “the Armenian world” within a postindustrial society. Are there followers of this idea of yours?
- There are thousands of them not only in Armenia, but also outside it. In fact, it is obvious that we live in the Armenian world. No matter in which country they live, our compatriots are concerned with national problems, they seem to be united with national thinking, cultural interests and a common church life. We have tens of national political, charitable, public organizations operational outside the Republic of Armenia - in the Armenian world. I wonder that this reality is questioned by such people as are representatives of traditional parties. Being residents of foreign countries, they should not be bound by any geographical restrictions whatsoever. The question may arise: if it is true that the Armenian world does not exist, then how come we have pan-Armenian structures vlb worldwide? It seems to be obvious that we deal her with political speculations ained at discrediting me in the eyes of our compatriots.
For example, a while ago I happened to hear a statement in Parliament which affirmed that the ideology of the Armenian world was an illusion. This opinion was voiced by a person representing a traditional party. As I was shocked and perplex I asked for the stenograph of this statement which confirmed the fact. This is inadmissible and we cannot afford questioning national ideas simply for discrediting a person.
The past is recorded in the future
- Our society can boast today a layer of competent people with firm belief and valuable outlook. They are guided by a precise idea which passes first of all through self-recognition implying that “History has its source in the future.”
- I have repeatedly stated in my articles that the past is recorded in the future. At first sight, this idea seems to be bizarre and repels people. Nevertheless, both philosophers and methodologists have given a precise answer to this question. A vivid example is how the textbooks of history - called to bring up patriotic citizens from the very school - are drafted. A people’s history is supposed to be represented in a light to inspire pride for one’s ethnic identity. The material should be stated in a way to foster a wish to see the future and to be worthy one’s ancestors. And this can only mean one thing, namely that the author of a textbook should see the future and, based on it, advocate specific moral values. From this perspective, history seems to be drafted in the future.
- What is being done in this respect or, to be clearer, what is the first step to take on the way to building the Armenian world? You just evoked the problem of textbooks, while I doubt that the educational system we have today may provide the possibility of shaping a knowledge-based society.
- You are right. And, therefore, we should see clearly which way we should go to have strategy for the development of education and research in our country. Only a couple of decades ago, the organization of public life, as well as the analysis of territorial and economic field processes was commonplace in the works of economists worldwide. Today a third aspect - the virtual dimension - has emerged. Hence, it is already question of ensuring harmonious development of these three dimensions: territorial, branch and virtual.
Modern information technologies have generated a new plane in which there are no free spaces, but there is an opportunity for organizing public life. The virtual space of social self-organization is closely associated with the system of education and science as it allows individuals to be trained in the world’s largest educational centers. Therefore, we are bound by duty to tap on the opportunities offered by these virtual networks. With this purpose, we have founded Luys foundation under the aegis of the President of Armenia. In fact, the foundation lays the basis of a pan-Armenian network linking Armenian students all over the world. This summer we will be organizing various events to bring them together in Yerevan. The number of these students is due to grow year after year.
At the same time to enhance the quality of Armenian high schools it is necessary to use the possibilities of talented Armenian scientists, teachers all over the world. It is necessary to attract foreign universities into our country including top universities from the United States and Europe which will compete in this area and improve the quality of education.
Also, we plan to have some local universities accredited with renowned foreign universities. In tis case, our universities will simply be obliged to improve their standard. I think all this may allow us to modernize our educational system and bring it into accord with today’s global educational system.
- Let us come back to our days. How do you treat the ever-growing rumors about your imminent resignation?
- I have once answered a similar question: I have been in this post for a while now, and I am used to constantly hearing rumors like this. This is why I take them easy and would advise others to do so. Otherwise, I shall fail in my duties.
- Either the opposition is concerned about it: lest you should leave your post …in fact, there is also the personality of Robert Kocharyan …
- There have been lots of political speculations in our country for the past two decades. Therefore, I do not think it necessary to respond to void conversations.
- Do you not even want to argue with Robert Kocharyan who was seen to criticize you recently?
- Many looked upon his interview to Mediamax as a criticism, though frankly speaking I do not think so.
- And the last question. Are you familiar with the Armenian National Congress’s “100 Steps” program?
- Yes. Also I can only welcome that the opposition makes a program public in Armenia presenting its vision of the future and at the same time inviting the public to take part in the discussion of this document. It is quite a sound and civilized form of political debate which should be welcomed. This document contains a series of points which conform with the program of the government. But at the same time there are several unacceptable for us items, including some offensive assessments. If one invites the public to discuss a program which contains offensive opinions, many can feel mistrust believing that this is another political show.
Gohar SARDARYAN
