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Interview's ArmInfo with Deputy Economy Minister of Armenia
by Samvel Sarksyan
In December 2011 the Government of Armenia approved a Strategy of export-oriented industrial policy in Armenia. Tigran Haroutyunyan, Secretary of the Industrial Council under the Armenian Prime Minister, Deputy Economy Minister of Armenia, speaks on the measures of implementation of the Strategy in his interview with ArmInfo.
Mr.Haroutyunyan, what steps have been taken to elaborate the sectoral development strategies?
To begin with, under the Strategy of export-oriented industrial policy in Armenia, on 29 February 2012 Prime Minister Tigran Sargsyan signed a decision on creation of the Industrial Council under the RA Prime Minister. At present, two sittings of the Council have already been held. 60% of the Council are representatives of the private sector and leaders of business associations.
At the initial stage of fulfillment of the Strategy three priority branches were selected - pharmacy and bio-technologies, brandy production and strict engineering. The overnment signed cooperation memorandums with business associations. The development strategies of these branches have been already drawn out, the secretariats of which have been guided by Armenian Development Agency, and the steps have been specified to be taken for development of these branches. At present wine production strategy is being drawn out. Taking into consideration the fact that brandy and wine production is based on one and the same raw materials base, and has got almost similar problems, these branches will be united in one cluster. Just the same way, jewelry production, gem-cutting and production of watches will be also united.
As you know, a free economic zone has been created in the area of the Yerevan-based RAO Mars and Mergelian Institute of Mathematical Machines. The operator’s powers have been delegated to Sitronics Armenia (the subsidiary of the Russian company Sitronics, a concern in the sphere of electronic engineering, telecommunication and information technologies). The second free economic zone will cover the jewelry cluster enterprises, and negotiations are currently being held with the Armenian Jewelers Association and Eduardo Eurnekian, Head of Corporación América. The infrastructure of Zvartnots Airport building will be used for location of the free economic zone.
In the near future development strategies will be elaborated for textile industry and footwear production. In general, similar strategies will be drawn out for 11 branches of industry within the next two years. Sectoral councils will be set up, programs will be worked with specified sources of financing and the relevant steps will be taken. I’d also mention that the business community is wider represented in the sectoral councils than in the Industrial Council under the Armenian Prime Minister, because in the Industrial Council business is represented by sectoral associations, whereas in sectoral councils – by the heads of significant companies. The sectoral councils are becoming a platform for the businessmen to voice their problems, and inside the sector the problems are almost similar for all companies. And these problems by all means find a solution in the Government.
What are the current conditions and what conditions will be created to increase the added value in Armenia?
The tools for resolving this problem have already been created to dampen the impact of the global economic crisis of 2009 on Armenia’s economy and Armenian producers. These tools will also be applied when implementing the Strategy. Among these tools, one should first of all mention the Government’s provision of a 3-year delay in payment of the value-added tax on the imported equipment under investment projects worth over 300 mln AMD (nearly $717.7 thsd). In 2011 alone the delay in VAT payment was provided for implementation of 10 investment projects with a total forecasted volume of investments of 53.5 bln AMD (the total VAT to be delayed was 10.7 bln AMD), due to which 1.1 thsd workplaces would be created. Over the first 5 months of 2012, the delay in VAT payment is provided for implementation of 7 investment projects with a total forecasted volume of investments of 16.14 bln AMD (the total VAT to be delayed is 3.2 bln AMD), due to which 310 new workplaces will be created.
Companies that import raw materials, equipment and component parts in the “temporary import” mode, produce finished products and export them enjoy the delay in payment of VAT and customs duties. In 2011 such preference was provided for 9 projects of 8 companies, and the total amount of delayed payments for the specified projects was 14.95 bln AMD, and over Jan-May 2012 there were 5 such projects with the delayed payment being 1.3 bln AMD.
One more tool is the lending on preferential terms. For that purpose, in July 2009 the Government of Armenia founded “SME Investments” UCO, which provided 53 loans worth a total of 3.6 bln AMD to 44 small and medium enterprises (39 individuals and 5 individual entrepreneurs).
In addition, a mid-term program of spending for 2013-2015 for implementation of the Strategy of export-oriented industrial policy in Armenia has already been presented to the Finance Ministry. The program envisages the use of the following tools supporting exporters: taking measures to attract well- known international companies, subsidizing loans for production activities via SME Investments UCO, providing market information, promoting Armenian commodities in target markets. The tools will also include provision of grants for receiving international certificates and introduction of innovations, financing participation in international exhibitions, organizing foreign distributors’ trips to Armenia
and establishing business ties, financing development and holding retraining courses.
Is the Government going to apply new mechanisms to support small business?
As known, the issue of incubation of the start-up companies is addressed within the Enterprise Incubator Foundation. In 1-1.5 years it will be possible to speak of the results of work of the companies to be placed in Technopark of Gyumri. Both the Fund "Small and Medium Entrepreneurship Development National Center (SME DNC) and SME Investments, which also provide the small and medium enterprises with AMD long-term loans at low rates, apply the tool of temporary acquisition of a share of the small technological enterprises’ authorized capital. SME DNC also provides advisory services, the Armenian Development Agency provides services on organization and participation in foreign exhibitions, as well as information and marketing services, and the state provides the agrarian enterprises with subsidies for acquisition of seeds, fertilizers, etc. So, all the tools supporting SMEs are being applied in Armenia and we should gain maximum results from them.
Has the business information infrastructure, which is to inform the Armenian producers of the possibilities of export and the foreign businessmen – of the possibilities of investment and business conduct in Armenia, already been launched?
I think the business world has reached such a level of globalization that it is not hard to look for business partners or other business information. 10 years ago our businessmen kept in secret the contact details of their suppliers, but now the business information is available in the internet. So, a businessman only has to choose the most eligible proposal out of thousands of proposals with due regard for the price-quality ratio and the best transport logistics.
We offer our entrepreneurs to make use of the Enterprises Europe Network’s services, as there is no other better business information platform. The platform unites the overwhelming majority of Europe’s companies, provides them with descriptions, contacts, product ranges, as well as information about counteragents, in which the companies are interested. Moreover, the information about the companies is inserted into this network absolutely free of charge. For Armenia, the provider of this network is SME DNC.
What steps have been taken to involve Diaspora, donors and international structures in implementation of the Strategy?
The minister of economy has held two meetings with the representatives of international and foreign organizations, which traditionally support and finance the projects in Armenia. These are such structures as United Nations Industrial Development Organization, World Bank, European Bank for Reconstruction and Development, USAID, German Society for International Cooperation (GIZ), Japan International Cooperation Agency (JICA), etc. We expect support from all the specified organizations. The Government of Armenia is also working to make the expenditures on the Strategy have little impact on the expenditures of the Armenian state budget. As regards the Armenian Diaspora, a database of the Diaspora representatives holding high posts in foreign companies is being created.
Thanks for the interesting interview!