Armenia in a Reconnecting Eurasia by Kuchins Andrew C.;Mankoff Jeffrey;Backes Oliver; & Jeffrey Mankoff & Oliver Backes

Author:Kuchins, Andrew C.;Mankoff, Jeffrey;Backes, Oliver; & Jeffrey Mankoff & Oliver Backes
Language: eng
Format: epub
ISBN: 9781442259416
Publisher: ROWMAN & LITTLEFIELD

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Armenia in a Reconnecting Eurasia

For landlocked, blockaded Armenia, enhancing connectivity to international markets and partner states is of vital importance. As one senior official noted in an interview, “We need more corridors” (though as a foreign diplomat mused, what many Armenians really believe is that “we need new neighbors”).

Armenia’s inability to participate in intra-and inter-regional connectivity projects such as the Baku-Tbilisi-Ceyhan pipeline and the Baku-Tbilisi-Kars railway limits the country’s integration with global and regional markets and contributes to the more general economic fragmentation of the South Caucasus. The fundamental principle characterizing Armenia’s foreign economic policy is “engagement,” which envisions Armenia as an equal participant in the post-Soviet as well as European integration processes, involving all the vectors of Armenia’s complementary foreign policy: the Commonwealth of Independent States (CIS), NATO, CSTO, EU, as well as bilateral relations with individual states.1

In its pursuit of development and prosperity, Yerevan in 2014 introduced the Armenian Development Strategy 2014–2020 (ADS) to address the fundamental structural weaknesses of the Armenian economy while seeking to expand and diversify trade and investment (see Box 3.1).2 A key aim is to reduce Armenia’s trade deficit and increase exports to 35 percent of GDP by 2025.3

BOX 3.1. ADS 2014–2025 Key Priorities and Policies (brief)1

Finances and Revenues

• Promotion of nonlending institutions such as insurance and stock markets; promotion of competition; eliminating entry barriers; increasing the role of the regulator State Commission for the Protection of Economic Competition (SCPEC)

• Expansion of the tax base, in the meantime improving the investment environment to protect primary consumer goods from increase of prices; increasing tax revenue as percent of GDP by 0.3 percent to 0.4 percent per annum, starting from 2016

Trade

• Liberalizing export policy and diversifying of export profile in terms of products and destinations; gradually changing the resource-based economy toward knowledge-based goods and services; creating incentives and a support structure for the promotion of the export industry

• Accelerated export policy to decrease the trade deficit to 4.5 percent of GDP in 2025 from 24.8 percent in 2012

Agriculture

• Increasing efficiency (productivity and labor efficiency) through a mixture of public spending and structural reforms; increasing land productivity and utilization; providing access to affordable financial resources; improving the administrative system of the sector

Labor Market

• Implementation of minimum wage policies in accordance with the dynamics of the average wage demand and supply equilibrium of the labor market

• Implementation of new taxation methods based on expanding the tax base and increasing the rates for non-distortionary taxes and labor market improvement training programs

• Increasing employment income and rates of the working-age population from 57.3 percent in 2014 to 71.1 percent by 2025; reducing unemployment from 17.2 percent in 2014 to 10 percent in 2025

Poverty Reduction and Social Protection

• Direct and indirect accelerated income enhancements through employment income increase and targeted social projects for the most vulnerable groups; increasing poverty line; increasing the recipients of the social assistance programs to 100 percent of those qualified; targeted poverty reduction to a rate of 13 percent by 2025 from 32.4 percent in 2012

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