Download Armenia

Aid for Trade Needs Assessment
Armenia: Trade and Human
Development
Vrej Jijyan,
UNDP Armenia
United Nations Development Programme
Background Info - Armenia
• Armenia is a landlocked, low middle income, country with a
GDP of 9,4 bln USD and GDP per capita of 2,880 USD.
•2001-2008 the annual GDP growth was, on average,12%.
However, as a result of the crisis, in 2009, the GDP declined by
14% and in 2010 registered a modest growth of 2.1%.
•Main branches of economy are services (42%), industry (22%),
agriculture (17%) and construction (14%).
• The country has a liberal trade regime with a simple two-band
import tariff (at 0% and 10%) without import/export quotas.
•Armenia is a member of WTO and has FTAs with most of CIS
countries and GSP+ arrangement with EU.
Main Findings (1)
• Though Armenia’s trade turnover in 2009 exceeded the same
indicator of 1999 by 4 times (4 bln USD), Armenia’s trade
openness and the share of export/GDP is rather modest (8%).
• Export consists 18% of the overall trade turnover and it is
characterized by lacking diversification both in terms of product
range (base metals, precious stones and foodstuff) and
destination countries (EU 44.5%, CIS 20% and USA 10%,
Georgia 7,6%), making it highly vulnerable to economic
changes in partner countries.
• Imports
are
fuelled
by
the
influx
of
external
savings/remittances received (18% of GDP), which is leading to
a situation similar to the Dutch Disease phenomenon, resulting
in increasing demand for non-tradable goods and decreasing
the competitiveness of tradable goods.
Main Findings (2)
•Despite the decrease in trade turnover with CIS countries, the
products exported to these countries, as well as to Georgia
continue to have significant impact on human development
through income and employment creation.
•Comparatively products exported to EU and USA did not lead
to significant increase in employment, however they affected
human development through government revenue and
spending, as well as CSR activities.
•Though Armenia has relatively open economy that enjoys
certain preferential trade agreements (EU and most of CIS),
however trade, in particular export, is not considered as an
important source for economic and human development and the
untapped potential in this regard is significant.
Main obstacles to trade (1)
• The main constraint is the geo-political position of Armenia ,
which increases the transportation/transaction cost linking the
country to the outside World.
• Lack of sectoral diversification and the monopolistic structure
of the main sectors of economy. Armenian history of
double‐digit growth mostly took place due to several
non‐tradable sectors and remittances from abroad.
• The economy does not operate to its full capacity and, as a
result, its real production potential is not realized. Armenia’s
economic scale/output are modest, especially in agriculture and
certain processing industries, which is limiting the country’s
participation in international commercial transactions.
Main obstacles to trade (2)
•The role of SMEs is being diminished, specially in fields like
agriculture and light industry, by an unfavorable business
environment and the lack of relevant institutions that can
provide relevant information/knowledge to promote their exports
to foreign markets.
•The absence of adequate institutions/infrastructures that can
support and facilitate exports, such as EXIM banks,
information/marketing centers and modern testing/certification
facilities.
•Also, the lack of mechanisms and policies that promote the
development and transfer of modern technologies/equipments,
which can result in the improvement of the competitiveness of
Armenian exports aboard .
Main Recommendations (1)
•Economic policy is mostly focused on macroeconomics and
structural reforms. Those are extremely necessary; however,
microeconomic regulation should also gain certain importance.
•Promote the diversification of exports/imports markets and
products as well as the expansion of trade arrangements.
Identify and target a few sectors that will form a base for
industrial development among labour intensive and knowledge
intensive sectors.
•Improve the business environment and increase the role of
SMEs in the economy, through simplifying tax and customs
regulations; developing the financial system; creating
conditions that facilitate the establishment of start-ups; and
promote the establishment of SMEs’ associations.
Main Recommendations (2)
•Establish information/marketing centers that will be qualified to
distribute up-to-date information to exporters. This will facilitate
new information/knowledge exchanges and will ease the entrance
into foreign markets.
•Capacity-building for testing laboratories to enable them to
adequately test the quality of exported products. This can facilitate
the international accreditation and mutual recognition of Armenia’s
laboratories and standardization bodies.
•Encourage the use and the transfer of new technologies and
equipments through organizing of regular forums; financing
researches on new technologies; VAT and other tax exemptions in
case of importing new technologies, long‐term crediting/leasing for
new equipments; and establishment of venture fund, etc.
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