What Will DCFTA Bring?

Interview with Gagik Makaryan, president of the Armenian Association of Employers

What will DCFTA bring to Armenia?

Free and comprehensive trade involves some other principles. Under a free trade agreement we will use certain regulations, approximate our legislation with the EU legislation, carry out democratic and other reforms.

I think, in the long run, the purpose of Europe is to develop its own economy. It will first of all think for itself, not for us. First, it will foster trade and production in the EU. Second, the EU has its own global economic development policy, and production and import of raw materials will naturally be done at the expense of countries like ours because they remove from their countries every industry that harms the environment and people’s health. It will try to use the capacity of developing countries as a supplier of raw materials. There is a risk that we will be a raw material supplier. Third, Europe has a labor shortage. Their population is not enough, they will import labor from countries like ours. In other words, there is a risk that this cooperation will empty us of brains and labor. There is also a risk that our imports will be affected by the EU because it will become more powerful and will export to our countries, both for the money it will pay and by means of its political influence.

Although I am against the signing of a free trade agreement among the CIS countries, I also said that it is something temporary. This agreement has a shortcoming. We can sell our non-competitive goods to one another in the CIS but as life develops, Europe will join us, we will not be competitive with Europe, we will be importers of European stuff. The upcoming 3-4 years will be a crucial period. We will need to carry out fundamental reforms and boost the economy otherwise we will become an appendix which supplies labor and raw materials and receive manufactured goods. If we fail to carry out reforms, the economy of our country will be based on raw materials, the country’s independence and industries will weaken.

But the members of government note that the DCFTA will help the Armenian producers to produce better products, the Armenian production will be competitive in the world. Don’t you think so?

However, several important issues need to be solved to raise the quality of production. First, one needs to enable a businessman to make investments. In other words, the political and economic reforms should enable a favorable investment climate. It is necessary to encourage modernization through loaning or other means. The greatest problem is modernization, enterprises do not have enough money for that, while interest rates are high. The extension of payment of VAT granted by the government mainly affect major business. Small enterprises will be left out, remain ignorant, weak and with low productiveness. Meanwhile, the bigger ones will be able to modernize to some extent. The big companies are in mining, jewelry and diamond and telecommunication businesses. We must face small enterprises, loan programs must be reviewed, cheaper and long-term loan offers must be available. It is necessary to focus on food production and other businesses.

So is the government taking the move of deepening trade with Europe without taking into account the importance of the following reforms?

It takes this move together with Europe because there are also political interests. Let’s not forget that Europe is a major donor. We must make concessions, whether we want it or not. We must face Europe because it is a guarantee of our security, the markets there are more stable. If we try to develop our economy through this move, we must carry out reforms now, understand what is right, help and boost our economy. But reforms must be part of a package. We can’t do one thing this way today and that way the next day.