Footprints - Armenia » armenian business

In 2012, Armenia Must Innovate, Not Devastate

editor — Sat, 14 Jan 2012 10:34:22 +0000

A dense forest in upper Lori (Photo Christian Garbis)

Last night while out for a stroll with my dog I met my friend Haik who lives next door. We were talking about the advantage of having a garage to keep a car away from gasoline thieves. who love to ravage my Niva’s fuel supply.

While we chatted the upstairs neighbor, who along with his wife and kids has snubbed me for the last five years despite the number of times I’ve said hello, stopped to great Haik and exchange New Years greetings. As they were parting I overheard him telling Haik that he had taken his family to Moscow for the holidays, since staying in Armenia was “meaningless.”

The neighbor, purportedly a banker by profession, is one of these nouveau riche Yerevanites who suddenly found himself with a lap full of cash overnight. Within the span of only a couple of months I recall he purchased two brand new Hyundais and remodeled his home. And now that he has the money to burn, it’s “meaningless” for him and his family to celebrate the holiday season in their own country. Like it’s all some big joke.

Vacationing outside Armenia for New Years and Christmas is a trendy thing to do nowadays. But this sentiment of meaninglessness is permanent, particularly amongst the wealthy. A glance of the daily headlines will make this obvious — government officials trying to push through deals to excavate hundreds of hectares of land for mining projects, or displacing hundreds of homes for urban development projects, cutting forests to sell the wood, and so on and so forth. For these people, it appears it is “meaningless” to take pride in your country, since as the old ludicrous saying goes, “the country is not a country” to begin with. And since the world is going to end this year as many the naive believe, it’s better to take advantage while you still can. Yet the nouveau riche appears to have been living by this mindset on a daily basis, and I am convinced they have no love for country, only what they can reap from it for fattening their purses. An imprudent generalization, I admit, but there it is.

I can’t say what this New Year will bring for Armenia. But there’s one thing I always hope for — when people with the means to benefit their nation will come to their senses, reset their jaded attitudes and begin to innovate rather than devastate.

Will the New Tax Plan in Armenia Work?

editor — Thu, 03 Nov 2011 21:11:57 +0000

Yesterday just over a month after the government revealed its $2.5 million budget plan for 2012 Prime Minister Tigran Sarkisian explained just where the $268 million in tax revenues was to be generated. There are three primary sources it seems: from a tax on luxury automobiles, a tax hike on the upper class, and high excise taxes on expensive alcoholic beverages.

First let’s look at the car tax. He proposed that the owner of a car estimated to be worth $90,000 or more be taxed, estimating the collected amount to reach around $2.6 million (1 billion dram). This expectation is a bit naïve thinking, however, since the number of cars priced that high is so infinitesimal that it will be hard to believe so much will be collected in taxes. There are ways around paying that “luxury tax” of course. Since the customs department determines the value of automobiles entering the country and the customs fees required to be paid using whatever mind-numbing algorithms they employ, it certainly wouldn’t be difficult to pay an official a bribe to set the worth of the car at $89,000, thereby avoiding the luxury tax.

Then there’s the expensive alcohol tax – amounting to a 50 percent increase in excise duties. Fancy drinks like high-priced Cognac, haughty French wines and the like have a niche market, although the PM claims sales make up a 15 percent share of alcohol sold (naturally there’s no way of knowing where he got that number from). I’ve only seen expensive liquors and wines at SAS supermarket, which caters to Yerevan’s nouveau riche as well as foreigners working in the country. It’s hard to believe anyone – a visitor or a local – would be willing to pay several hundred dollars for wine when a five-buck bottle of Areni will suffice most tastes. In other words, the PM shouldn’t expect much tax revenue from the food and drink business sector.

The proposed tax hike from 20 to 25 percent of income for anyone making at least $5300 a month is intriguing. It’s safe to say that anyone making a salary that much or higher is not properly reporting their annual worth to the tax authorities anyway(if at all), and again, paying them a bribe to avoid paying higher taxes will not be difficult.

Even if he decides to crack down even more on small and medium-sized businesses (a.k.a., ordinary people trying to make a buck) than he already has, it’s hard to believe he’ll be able to collect very much additional tax revenue from them since they’ve been squeezed to the breaking point. I’ve been seeing many vacant stores recently in Yerevan, and low sales may not be the only determining factor in the decision to close shop.

The head of the State Revenue Committee Gagik Khachatrian has yet to be convinced that the funds can be raised with the PM’s plan. He’s been expressing his concerns about the new budget and the government’s anticipated ability to hit its target since the 2012 budget was unveiled on September 29, claiming that there was no way it could collect so much in tax revenues with its current focus.

What’s strange is that there’s really no intent in store to properly tax the oligarchs. Why doesn’t he simply go after the multimillionaires? Probably because that will mean he will ultimately have to tax himself.

Perhaps the Prime Minister really expects to collect the $268 million through the established system of bribery in place. Khachatrian is certainly right – on the surface of things the expected numbers just don’t add up.

Yerevan Vendors Unite to Protest Ban

editor — Thu, 20 Jan 2011 13:34:28 +0000

Yesterday while driving past Yerevan City Hall my wife and I couldn’t help but notice a couple hundred or more people in front of the main entrance. Some were holding placards reading slogans like “Mayor Keep Away.” We didn’t know what was going on at first until we went online later in the afternoon

Turns out according to a News.am article that it was in response to a recent ban imposed on independent fruit and vegetable vendors operating on the sidewalks of Yerevan. In other words, anyone selling things from lemons to mixed greens to apples and persimmons in small neighborhoods — even in courtyards — are no longer allowed to do business. These vendors from what I’ve seen are mostly middle aged and they’re doing what they can to make a buck. Some come to Yerevan from far away places, like Gavar on Lake Sevan, to sell produce, while others are from around the block. Not everyone can afford to sell in the open marketplaces, probably because they can’t afford the rent, so they set up shop on the sidewalk, but never allowing their merchandise to impede foot traffic.

Throughout the year City Hall cracks down once in a while on these people, who are what you might call assiduously modest entrepreneurs. They mark up their stock by 50 dram, and on a good day they’re lucky to make 4,000 or 5,000 dram, or around $11-13. I know this because I’ve spoken to them. They are just trying to get by the only way they can while being in business for themselves. It’s true, they pay no rent, and I don’t know how many are actually paying taxes. But they’re not the ones City Hall or the Armenian government for that matter should be going after.

The vendors themselves are for the most part decent people, and they pick up after themselves after they’re done for the day, at least from what I’ve seen, so I don’t understand the arguement that their trading is “dangerous” as the municipality claims.

This ban actually applies to anyone selling anything on the sidewalk. Near the Komidas market for instance you could find people selling cellophane bags, combs, or incense just to make a buck.

Based on the recent actions of the new Yerevan mayor Karen Karapetian, it is obvious that he has no idea how the other half lives or even wants to know. Karapetian, the former head of ArmRosGazprom who was hand-picked for the job by President Serge Sarkisian, seems to be mired in the ways of the elite. If he had any comprehension of how ordinary people are trying to make an honest living, he would never have imposed such a heartless, ill-conceived ban just after taking office.

You can read more about the situation on RFE/RL.

Let’s Open The Border!

editor — Thu, 08 Oct 2009 13:45:05 +0000

As you’ve undoubtedly read in the news during the last week, President Serge Sarkisian visited many cities around the world where large communities of Armenians exist, namely New York, Paris, Los Angeles, Beirut and Rosdov-on-Don. In the first four cities cited he was met with hundreds or else thousands of angry protestors before meeting with community leaders behind closed doors.

In Paris things became ugly when people were taken away by police for attempting to thwart the president from laying a wreath at the memorial to Gomidas Vartabed there. Naturally he didn’t comprehend what he was up against when he said at a meeting on Thursday in Yerevan that “I expected that we will put on display our unity and position on this issue with a massive demonstration, rather than a provocation by 100 persons.”

An article by RFE/RL reported this:

The president nonetheless found the trip useful, saying that he received “very important messages.” “I had a chance to once again feel just how different we are depending on our birthplace, community of residence, organizational affiliation and at the same time just how similar we are with our collective Armenian identity,” he said.

Sarkisian spent most of his speech again defending his policy of rapprochement with Turkey and trying to allay serious concerns expressed by his some Diaspora groups. He insisted in particular that the planned establishment of a Turkish-Armenian panel of historians will not stop Yerevan from pressing more countries of the world to recognize the 1915 mass killings of Armenians in the Ottoman Empire as genocide.

“On the question of the recognition and condemnation of the genocide, we have an obligation and we will fulfill that obligation till the end,” he told the advisory body comprising Armenia’s top state officials.

Nationalist groups in Armenia and the Diaspora believe that such recognition should be eventually followed by Armenian territorial claims to parts of what is now eastern Turkey. They say that the Sarkisian administration precludes such possibility by agreeing to formally recognize Armenia’s existing border with Turkey.

“Making territorial claims is not the best way to start normalizing relations,” countered Sarkisian. “There are realities of the 21st century political culture which we must take into account.”

Sarkisian again brushed aside opposition allegations that as part of the Western-backed deal with Ankara he also agreed to ensure greater Armenian concessions in the Nagorno-Karabakh conflict. “We will never opt for unilateral concessions in the Nagorno-Karabakh issue, regardless of what we could be offered in return,” he said.

The president also scoffed at suggestions that the reopening of the Turkish-Armenian border would make Armenia economically dependent on Turkey and hurt domestic manufacturers. “It is like suggesting that the best remedy against headache is decapitation,” he said.

Those damn nationalists…

So basically the president didn’t take anything into consideration when he met with concerned, even pessimistic leaders of Armenian communities in private wherever he went. Seems that Foreign Minister Edward Nalbandyan will definitely have the go ahead in signing the protocols on Saturday (Oct. 10), then of course it’s up to the parliaments of Turkey and Armenia to verify them. The Republicans and junior coalition partners Prosperous Armenia and Orinats Yerkir have pledged their support for the protocols, so they are sure to be ratified in the National Assembly without a doubt.

I suppose the only hope for those who don’t want the border open, I would say the majority of Armenians worldwide (and even among apathetic or distressed Armenian citizens, who likely hold the majority opinion that the border should remain closed under the given circumstances despite government propaganda claiming the opposite) is that the Turkish parliament with its powerful nationalist hardliners will reject the protocols. That is most likely not to happen: the Turks have plenty to gain from an opened border. The Armenian economy will most certainly be totally controlled by Turkish business interests after some time, despite the president’s unconvincing arguement to the contrary. After all, I don’t think he really cares about Armenia’s long-term future. None of Armenia’s leadership does, otherwise they would consider what’s really at stake.

Yet I couldn’t help think this morning that as a surprise move Turkey would have perhaps even more to gain should it recognize the Armenian Genocide just before or even shortly after the protocols are ratified. Turkey will certainly make huge sums of money in tourism with hundreds of thousands of Armenians in the diaspora returning to their homeland for a visit. Emotional ones would probably buy land in their hometowns, perhaps even build a house. Before long, Armenians will find themselves in the situation they were in 100 years ago and long before–living as serfs under Turkish hegemony.

But to hell with all that. Open the border! Let’s make as much money as possible by buying and selling Turkish-made crap in the Armenian marketplace! Let the Turks come in and spend money. Let’s go to Turkey in the summer for vacationing! Let our businesses grow and prosper–that is, of course, until we are bought out completely by Turkish business rivals.

Good luck, Armenia. You’ll definitely need it.