by Tatevik Shahunyan
Only time will show if the Government's decision to switch to the compulsory accumulative pension system was right, second President of Armenia Robert Kocharyan said in an interview to 2rd.am.
"This initiative was first advanced by the Central Bank in 2004. The Government objected to it and proved to its authors that Armenia needed the European model, a model based on the principle of solidarity between generations. This is not a choice between a good and a bad model. Both models have both advantages and disadvantages. They in the United States have developed financial and capital markets, so, they have capacities for keeping their accumulative funds. Here the money works for both the population and the economy. In Armenia we have the problems of continuing emigration, aging population and growing poverty. So, it will be very hard for our employees to pay for the pensions of their retiring colleagues. We have almost no capital market in Armenia. So, one part of the accumulated funds will be lent to the Government and turned into new domestic loans, while the other part will be sent abroad as we have no sufficient financial instruments for managing the money. All this will hardly be good for the economy," Kocharyan said.
"This would not be a problem if we had a strong economy and a high employment rate, but now that financial markets are becoming increasingly volatile, there is no guarantee that the funds will not be lost as was the case during the crisis. If this happens, our Government will have no reserves to compensate for the losses. The bad thing about this type of reform is that it takes a lot of time, so, when problems arise, its authors are already gone," Kocharyan said.
He personally is against the reform. "Just imagine if I carried out such a reform in 2005. The subsequent crisis would have ruined it. Lots of people would have lost their funds, so, I would have hardly got away with a mere apology," Kocharyan said.