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Armenia: Election Frontrunners Make Economic Promises

Yerevan, 27 May 1999 (RFE/RL) -- The frontrunners in Sunday's (May 30) parliamentary elections in Armenia promise a major shift in the government's policy of economic liberalization toward a greater regulatory role for the state.

If implemented, the changes could set up a confrontation with Western financial institutions, whose monetary injections have been vital for macroeconomic stability. But analysts caution that the populist pledges, lavishly given during election campaigns, may be forgotten when the time comes for the new parliament and government to make decisions.

The Miasnutyun (Unity) alliance of former communist leader Karen Demirchian, now predicted to win the vote, advocates measures that run counter to prescriptions of the International Monetary Fund and World Bank.

Demirchian, who ruled Soviet Armenia from 1974 to 1988, says the government must play a central role in reviving industry, which declined dramatically in the early 1990s with the collapse of the command economy.

Another group expected to make a strong showing, the left-wing Armenian Revolutionary Federation (Dashnaktsutyun), wants a change from what it calls Armenia's "extreme-liberal" economic policy to a social-market economy. The party's platform slams past governments for what it says was a mindless obeying of Western dictates.

President Robert Kocharian indicated last week he's likely to form a new cabinet after the elections with Miasnutyun and Dashnaktsutyun.

After eight years of reforms, economic liberalism appears badly discredited. The beginning of the reforms coincided with an intensifying war with Azerbaijan over the disputed Nagorno-Karabakh territory, which hampered their success. The Armenian economy contracted 60 percent during the years 1991-93.

A policy of tight fiscal and monetary measures has put the economy back on track and it has been growing since 1994, but the growth so far has not made a major impact on living standards. Unemployment is very high and high interest rates stifle growth. Economists say single-digit growth is not sufficient for a quick improvement.

The main liberal parties, allied with former President Levon Ter-Petrossian, have mostly been discredited and stand little chance of success in the elections. President Kocharian has no party of his own to further his overall liberal ideas.

Job creation features in all party platforms. Demirchian's Miasnutyun bloc says Armenia's central bank should focus on lending money to stagnating industries at rates lower than commercial banks can offer. His bloc also promises to keep government subsidies on utility prices.

Sources close to the government say possible changes in Yerevan's economic course are causing jitters at the IMF. An IMF delegation in Armenia recently reportedly sought assurances that reforms would not be abandoned before releasing the last $29 million tranche of an Enhanced Structural Adjustment Facility loan to strengthen the country's balance of payments.

Heghine Manasian, an economic expert for the European Union's Armenia Economic Trends project, takes the view that foreign investment is the only realistic source of economic development. She told RFE/RL that "like it or not, our dependence on loans has to increase." She says a change in economic policy will not be as sweeping as campaign platforms suggest.

Manasian says Demirchian's bloc will succeed only "if it can mobilize the people and more efficiently manage existing resources."

Whether the former Communist boss, who's capitalizing on widespread nostalgia for the Soviet past, can do that is far from clear. Corruption and favoritism were rampant when he was in power. His bloc's present partners -- the defense minister and his allies -- already control many government positions.

(Second of two features previewing Sunday's Armenian elections.)

(Danielyan is a Yerevan-based contributor to RFE/RL.)