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Armenian Prime Minister Acknowledges Pricing, Inflation Problems

Armenian Prime Minister Tigran Sarkisian (file photo)
Armenian Prime Minister Tigran Sarkisian (file photo)
YEREVAN -- Armenian Prime Minister Tigran Sarkisian acknowledges that oligopolies are a major reason for the high cost of living in Armenia, RFE/RL's Armenian Service reports.

But Sarkisian told RFE/RL in an exclusive interview on July 16 that a top priority of his government was to create an equal tax environment for businesses and to promote fair competition.

"Price behavior in Armenia lacks elasticity," he said. "Prices do not respond quickly to changes in the supply and demand patterns: they do not decrease, nor do they rise quickly. The main reason is that the level of competition we have does not satisfy us."

"There are markets [in Armenia] that are dominated by one or several economic entities that are able to dictate their rules," he said. "That's why we have adopted new laws and increased the powers of the Commission on Economic Competition so as to enable it to fight this evil more effectively."

He said the biggest problem was the failure thus far to create "an equal tax environment and competition, which will solve this problem."

Discussing short-term government goals, Sarkisian was optimistic about the prospect of decreasing prices on some basic foodstuffs.

Government critics have repeatedly pointed out the rising cost of living as a major source of social tension in the country.

In March, President Serzh Sarkisian (no relation to the prime minister) called on the government to focus attention on agriculture and ensure prices returned to the level that Armenians are "accustomed to."

The statement was followed by government efforts to help the agricultural sector, including the announcement of a state subsidy on commercial bank loans and advice to farmers.

Last month, the Central Bank said consumer price inflation would ease significantly in the second half of this year thanks to an expected uptick in agricultural production.

"By the end of the year we will have an inflation rate within our target band of 5-6 percent," said Central Bank Governor Artur Javadian on June 14. He did not exclude that the inflation figure could end up "even below the level targeted by us."

"The situation in the agricultural sector will have an essential impact on our inflation level," Tigran Sarkisian said. "If we have growth in agriculture this year, which we are experiencing today, it will, naturally, lead to a decrease in the level of prices."

Free Economic Zone

Sarkisian also attached great importance to the establishment of a free economic zone at Armenia's international airport that will support import and export in agricultural produce.

"At Zvartnots [Airport] we are creating an environment that will help organize the sale of agricultural products," he said. "If for our farmers we create an opportunity to sell their products at a high price, it means that we will thereby encourage new investments and agricultural development."

Sarkisian also questioned an argument used by the opposition to qualify government policies as failed, namely that Armenia has been hit by another wave of emigration in recent years.

Opposition leaders and some pro-opposition media claim that migration statistics for the first half of 2011 show that tens of thousands of people leave Armenia and settle abroad every year.

"It is no secret that even during the Soviet times there were migrant workers from Armenia," Tigran Sarkisian said. "Today this index is estimated at 50,000-60,000 a year. They leave for seasonal work in spring and return in late autumn."

Sarkisian said that unless the statistics were reviewed integrally, they create an essentially incorrect picture.

But he added that losing even one citizen was a matter of concern for the small South Caucasus country of about 3.2 million people.

"That's why the government of Armenia has developed a complex program where we clearly point out what measures should be implemented for eliminating this negative phenomenon in Armenia," he said. "Understandably, first of all it is the creation of jobs... It means that if we want to eliminate outmigration, we should encourage economic development, the creation of jobs, and investment."