Reasons and Solutions
Armenia’s spending on health, education, and public investment is among the lowest in the world (as a percentage of GDP). The presence of monopolies or oligopolies as powerful players in imported goods limits growth and production opportunities, leading to higher prices and reduced opportunity for small business. Roughly a third of Armenia’s population lives below the poverty line.
A nation-wide survey found that a third of respondents are considering emigration within the next two years. Many of the currently-employed respondents look to emigrate in search of higher income in jobs that make better use of their professional qualifications. The desire to emigrate is predominantly connected with long-term goals which motivate emigration or permanent residence in other countries (most often Russia, EU countries or the United States).
Individual choices and perceptions driving emigration are rooted in larger systematic features of Armenia’s economic, political and social situation. Examination of those conditions can shed light on the background informing individual choices, and highlight reforms that might lead Armenia’s citizens to invest in a future for themselves and their families inside the country.
Problems in the economy and business environment include:
- Business centralization and monopolies: Business throughout the country is run by a small number of business groups who are also directly involved in state administration, with each group controlling a specific sector and region. This system of monopolies makes small competitors vulnerable (and often non-viable), fosters unemployment, and produces marked inequalities in wealth. Investment and growth cannot thrive in these unfair market conditions.
- Business-related procedures: Many procedures in areas such as tax reporting, regulations, import/export, finance, property protection, and contract enforcement are inefficient and unfair.
- Independence of the judiciary is a major concern. The Judiciary must be totally independent of the government and powerful economic interests. An independent judiciary is required to preserve the civil rights of citizens and to give foreign investors assurance that they will be treated fairly in commercial disputes.
- Lack of effective economic institutions: Existing institutions, such as the State Commission for Protection of Economic Competition, are ineffective at regulating the economy and supporting free competition; small businesses lack influence; and civil society and the media are unable to exercise oversight and participatory governance.
- Educational system: Higher education institutions are not adapted to market demands for trained specialists, and do not provide adequate professional development opportunities for graduates in technical fields.
Problems with the rule of law mostly concern the application of existing law in the judicial and law enforcement systems. The investigative and pre-trial phases of criminal procedures are susceptible to corruption and police abuse, with lawyers having little power to intervene.
Armenia’s governance system is seen to be weak by International observers. Popular participation is limited to elections, and decision making is non-participatory and opaque. Independent organized civil groups are still underdeveloped and ineffective. Parliamentary opposition continues to be fragmented, lacking in structure and organization.
Top-down efforts by the Armenian government to improve national shortcomings can be effective over the long term only through the development of institutions at all levels.
- Institutions, such as coalitions of lawyers’ and human rights organizations, non-for-profit organization and media, must be created and strengthened to improve the rule of law, secure property rights, advance equal economic opportunities and public services, and foster transparent and participatory decision-making.
- Better economic institutions are required, such as, for example, an institute of economic ombudsman and/or coalition of organization for protection of economic competition and property rights, to provide equal access to markets and free competition, prevent manipulation of markets, stimulate innovation and growth, and protect investors from risks.
- Transparent media and a stronger civil society will help to develop institutions faster and to hold the government accountable for improving incomes, access to health care, education, public services, with economic and social opportunities.
The report analyzes challenges and offers recommendations in the following areas:
- Employment and educational systems
- Corruption and the lack of Rule of law
- Economic and judicial reforms
- The need for Government accountability
- Business environment
- Lack of a cohesive parliamentary opposition
- Tax and customs policies
- Protection of property rights
- The need for civic activism and legal consciousness.
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