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Report: Monopolies, poor education, non-diversified exports and one-dimensional financial system impede economic growth in Armenia

  • by Gayane Isahakyan

  • Tuesday, March 4, 20:29

 To ensure long-term and sustainable economic growth, one should first of all remove the key constraints, Manuk Yergnyan, Head of EV Consulting, said at today's presentation of the 5th National Competitiveness Report of Armenia (2013-2014). This time the Report was dedicated to Growth Imperatives and Constraints.     

"Without removing the key constraints impeding the growth of economy, the efforts towards liquidation of other impeding factors will be senseless and inefficient.

The report identifies 4 key areas that currently impede growth through restraining more productive and massive investments in the country", said Yergnyan. The change agenda that needs to be spearheaded by both public and private sectors includes these four broad policy areas. 

One of the constrains is insufficient quality of human capital. "Armenia is not short of educated people.  The problem is the imbalance between the demand and supply of skilled labor force. There is a significant gap between the economy needs and the labor force supplied by the education system", he said. 

Another constraint is the distortions in competitive landscape. "The unfair competitive landscape and the shadow business have an unfavorable effect on the activities of certain enterprises and the economy in general. The recovery of the competitive landscape and creation of equal conditions for all companies will considerably boost entrepreneurship development in Armenia", Yergnyan said.  

The third constraint is the lack of self-discovery. "The prospects for economic growth of Armenia inevitably depend on exports. The current structures of exports and direct foreign investments give no new opportunities for exports and innovations. The strategic industrial policy of the country should aims to create such opportunities", he stressed. 

The last constraint is one-dimensional financial system. This prevents the country from financing different sectors of its economy. "In order to meet economic needs, we need a diversified financial system. Our financial system is dominated by banks and has no developed capital markets or share or venture funds," Yergnyan said.

He believes that the dialogue between the private and public sectors should be aimed at preventing the abovementioned constraints, particularly, at creating fair and equal competitive landscape, enlarging industrial policies, stimulating investments in education and sophisticating the financial system.

Armenia's Prime Minister Tigran Sargsyan said that it is the Government's priority to create a fair and equal competitive landscape for all companies. "This is the key driver of economic growth. If we do this, we will consider our mission done. Our second priority is to effectively redistribute our finances and actively funding SMEs. This is not only economic but also political goal as democratic society cannot exist without a well-off middle class," Sargsyan said.

Opposition MP from Heritage Party Armen Martirosyan said that the abovementioned problems cannot be solved without drastic governmental reforms. 

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