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What are the grounds for Armenia’s advancement by three scores in the competitiveness report?  An explanation by the economist

October 01,2016 14:28

According to the Global Competitiveness Report of this year, Armenia ranks the 79th among 138 countries by competitiveness, by improving its position by 3 scores compared to the previous year.  Though Armenia has advanced by 3 scores, however, its position lags behind neighboring Georgia, Azerbaijan and Turkey.  By Macroeconomic Environment Pillar, our country has fallen by 16 scores, by the Market Size – our country has lost its positions by 4 scores compared to the previous year.

Atom Margaryan, the dean of the department of Regulation of Economy and International Economic Relations at the State University of Economy of Armenia, in an interview with Aravot.am, referring to the report and the scores of our country, noted that Armenia was under extreme negative factors: sharp deterioration of the economic situation in Russia, which resulted in the significant decline in the inflow of private transfers, which reflected on macroeconomic solvent demand and economic growth.

“This year’s economic growth of 2.2%, and in previous years – 3%, and then the macroeconomic settings, which also had a negative process, the sharp growth of external debt, which currently is close to 5 billion 400 million dollars, expects a further increase.  In other words, in order to maintain the macroeconomic balance, especially the budgetary balance, foreign funds are attracted making it possible to ensure the stability of the economic system.  As for the rest of the pillars, Armenia has quite a stable place in a number of directions in these 12 pillars of competitiveness.  For example, Technological Readiness, Institutions, Innovation, and Business Sophistication, and Financial Market Development,” – said Mr. Margaryan.

By the pillar of Financial Market Development, our country has made a progress by 4 scores.  As presented by Mr. Margaryan, this is not only the banking sector. The financial market also includes especially the situation in the market of corporate securities, which is not considered to be good by the economist.  The banking system is only one pillar of this industry, in this perspective, according to the economist, there is a problem to promote the investment, support the entrepreneurship, and attracting new resources, especially in terms of attracting from foreign sources, “There are two main forms of investments: direct investments, about which the developing and transition countries should not have high expectations as of today, because these the developed countries also face such problems.

Now, they are making investments in the markets of each other rather than in the developing countries, consequently, it is necessary to use the 2nd vector, especially the corporate securities.  This means that the companies should also work on going to the market of securities, to make an emission and thus attract investments.  It refers to our successful companies.  Here, it is not only the issue of willingness but a need for the mindset.”

Mr. Margaryan noted that according to the report, in terms of Business Sophistication and Business Models, there is a progress of 16 scores, however, it is not tangible and visible about what actually has happened to the businesses behavior, and what significant changes have taken place in the business organization sector, “However, this score, the index of positive changes is not clear to me.”

Mr. Margaryan associates the fall of the Market Size by 4 scores with the domestic market, with the restriction of solvent demand.  In other words, the money that appeared in the hands of the citizens in the form of various income, including from external sources, from demand-generating factors, on the other hand, the suppliers reduce the volumes of the sale.  The negative trends of demand and supply led to the narrowing of the market.

Eventually, what are the grounds for Armenia to advance by 3 scores in the Competitiveness Index? In response to our question, the economist replied, “The list of pillars is big, each pillar has sub-pillars.  Armenia has registered progress especially in terms of Institutional changes, also in terms of Business Sophistication, and perhaps the biggest progress is in Technological Readiness and Innovation, because Armenia has a great potential in this sector and uses only a small part of its capabilities, and even this small part can advance Armenia in the competitiveness ranking.”

As observed by Atom Margaryan, if the new government that speaks about new job openings, investment growth and economic development model, it should focus on the development of this pillar, starting from education, technological developments, innovation, patent application, and put an emphasis on the development of this segment where there are competitive job openings, higher incomes, consequently, budget revenues, in the form of various dividends.

Nelly BABAYAN

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