The tax code is the pledge of our country’s enhanced competitiveness

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Հովիկ Աբրահամյան,Հայաստանի միասնական հարկային օրենսգրքի մշակմանը նվիրված միջազգային համաժողովPrime Minister Hovik Abrahamyan attended an international conference on the development of a unified tax code for the Republic of Armenia. The event was co-hosted by the Ministry of Finance and the U.S. Agency for International Development (USAID) Tax Reform Program.

Welcoming the guests, the Prime Minister highlighted the unified tax code in terms of our country’s long-term and sustainable development.

“Some three weeks ago the National Assembly approved the program of the new government, which seeks to continuously improve our country’s business and investment climate, including the tax environment.

In this regard, the development and enforcement of the tax code in line with the best international practices will be a strong impetus for further improvement of Armenia’s business environment and increased investment attractiveness.

On the other hand, we hopeful that the tax code will help enhance Armenia’s image among its foreign partners as a reliable partner with stable and developed tax system. In addition, the tax code will be designed based on the country’s economic priorities, opportunities and the existing bottlenecks, as well as on the regional priorities.

The tax code should promote as much as possible export-oriented, import-substituting, knowledge-based and non-raw material industries.

On the other hand, the new tax code should allow for effective fight against the black economy. We look forward to having a stronger tax base, increased revenue, especially through more accurate and stricter taxation of major businesses that will enable the government to implement more ambitious, comprehensive and consistent programs in the social, healthcare, environmental, urban development and other areas,” the Premier noted.

Emphasizing that the design of the tax code implies a vast amount of work, the head of government said he would appreciate having the active and effective collaboration of all the stakeholders, including political parties, businesses, non-governmental and international organizations.

“The tax code will be developed in an atmosphere of maximum transparency: any such recommendation, problem or proposed amendment as may arise throughout the design work shall be discussed in advance with the representatives of business circles on different platforms and in various formats,” Hovik Abrahamyan added.

The Prime Minister wished the participants fruitful work and urged them to make a concerted effort to pursue this important undertaking.

“I voiced this idea as early as two years ago when I was the President of the National Assembly. The introduction of the new tax code is the pledge of our country’s enhanced competitiveness,” the Prime Minister concluded.

The conference is attended by members of the Armenian government, officials from the Georgian Ministry of Finance, foreign ambassadors accredited in Armenia, representatives from international organizations, business circles, civil society and experts.

The discussions will focus on the need to introduce a unified tax code in Armenia based on the principle of public-private sector partnership. The international experience pertaining to the reform of tax legislation will be introduced, including that of the Republic of Georgia, the tax and customs reforms underway in Georgia, etc.

 

USAID PRESENTS MAIN FINDINGS OF TAX PERCEPTION SURVEY 2013

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Yerevan, Armenia – On May 7, the USAID-funded Tax Reform Project held a public presentation of the results of the Taxpayers’ Perception Survey 2013. Conducted by the Caucasus Research Resource Center (CRRC) Armenia between September and December 2013, the survey targeted 1,448 households, 400 taxpayer organizations and individual entrepreneurs in all regions of Armenia. The goal of the initiative was to create a baseline assessment of public awareness of the tax system in Armenia, tax compliance, communication between the tax authorities and taxpayers, and the efficiency of the tax policy and services provided to citizens.

Representatives of the Armenian government, the private sector, civil society organizations, international agencies, and independent researchers attended the presentation, which aimed to improve the general understanding of the tax system in Armenia and foster a productive discussion.

The Director of USAID/Armenia Karen Hilliard noted at the event that the benchmark survey would play an important role in promoting a public-private dialogue, enhancing mutual trust and public confidence in the tax system, and encouraging the culture of voluntary compliance to advance Armenia’s economic growth. “USAID will continue to assist Armenia in its efforts to improve the transparency and efficiency of the tax system. We hope the survey will be conducted annually to record the progress of the Armenian tax system over time and will support state authorities to introduce further improvements in the area of tax policy and tax administration,” she said.

CRRC Program Coordinator Lusine Zakaryan presented the main findings of the survey. A question-and-answer session then allowed the participants to discuss sector-related issues with Government officials.

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Government Keeps Promise: Funded Pension Bill Is In National Assembly

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կառավարոության նիստ

 A Cabinet sitting was held today, chaired by Prime Minister Hovik Abrahamyan. The government approved a bill on suspension of Article 76 of the Funded Pension Law. The aforementioned article shall be suspended until the enactment of the legislative package to ensure full enforcement of the Constitutional Court’s April 2, 2014 ruling.


Under the applicable law, in case of failure to make a mandatory retirement payment within the established deadlines, the citizen will have to pay a statutory penalty of 0.15 percent for each day of default. With the next decision, the above bill was recognized as urgent and will be submitted to the National Assembly in the manner established by law.

The Prime Minister noted in this regard, “We discussed this issue with all political forces, including the political parties represented in the National Assembly, as well as all the interested non-governmental organizations. We have tried to understand the public’s concerns and dissatisfaction associated with the pension reform. Today I have had my position and considerations posted on the Government’s website. I have issued a statement which clearly states the Government’s position. I would like you to get acquainted with my statement.” (See here).

The Government approved a set of legislative amendments to the law on alternative tax audits in the Republic of Armenia and about a dozen other legal acts in an effort to introduce alternative tax audit and horizontal monitoring systems.

Prioritizing the importance of the Bill, Hovik Abrahamyan considered it necessary to introduce its details to both the business community and the public at large. In this context, he reminded that the improvement of the business environment is among the Government’s key priorities.

The Government next approved a draft law on amendments to the Customs Code in order to ensure compliance with Paragraph 17 of the timetable set out in the roadmap of Armenia’s accession to the Customs Union and the Common Economic Space between the Republic of Belarus, Kazakhstan and Russia.

The draft law is expected to have a ten-digit FEA classification system in line with the requirements of the January 25, 2008 treaty on Unified Customs Tariff Regulation. The draft law is expected to come into force on the day of signing the instrument of Armenia’s accession to the Eurasian Economic Union.

The meeting next approved a bill on amendments to the Customs Code of the Republic of Armenia. The bill seeks to create effective customs control mechanisms through a system of risk management, preliminary and mandatory information processing, provisioning and simplified customs procedures introduced by the customs authorities.

The above-mentioned draft laws will be submitted to the National Assembly in the prescribed manner.
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U.S. Ambassador John Heffern’s Speech for the Third Annual Pension Conference

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Ջոն Հեֆերն

Good Morning Mr. Prime Minister and distinguished guests. It is my pleasure to be here today to participate in the Third Annual Pension Conference.

The United States values its relationship with the Government and people of Armenia.  We are doing whatever we can to assist in the development of the country’s economic, social, and democratic systems and institutions.

 

For 13 years, the United States has worked with local partners to reform Armenia’s social protection system, with a focus on pensions.  We have worked with the Ministry of Labor and Social Affairs to build sustainable models of

social services delivery and to implement broad-scale social reforms.

Why is pension reform so important?

  • It is important because it affects each and every citizen.
  • It is important because Armenia must find a way to provide pensioners more economic security.
  • Pension reform is important because the structure of employment and Armenia’s demography have changed. The pension system must change too.
  • Finally, it is important because the new pension system will give workers the option to shape their pension and contribute to their own retirement savings.

Pension reform is one of the more challenging reforms that any country faces. This is why Armenia has engaged international experts and spent more than ten years carefully selecting and developing a new pension system,  tailored to Armenia’s demographic and economic needs.

Pension reform is controversial. It involves long-term planning by governments, employers and workers, already faced with numerous short-term pressures.

So what is this new system? The new pension system will:

  1. Provide a safe and adequate pension to pensioners – this is the fundamental point; (repeat)
  2. Bring workers’ salary payments out of the shadow economy;
  3. Streamline tax administration and reduce corruption risks;
  4. Boost economic development by effectively investing the pension contributions.

We all know that implementation of the reforms will become the true test of their success. Moving forward, a number of issues are critical:

  • Broad public awareness is essential. As recent developments show, people do not understand even basic questions about this reform. Armenians are asking their government: Why is this reform necessary?  What does this reform do? How will it benefit the employee and future pensioner? How will it affect current pensioners?
  • The government, working with civil society and the media, should educate and explain the reforms – not just once or twice, but over and over. Public trust would be enhanced if citizens on all sides of the issue have the chance to provide input as part of the Government’s public education efforts. An accurate, inclusive, transparent and comprehensive awareness campaign enhances trust towards reforms and contributes to their eventual success.
  • Financial literacy is another key. Workers and future pensioners need to understand how their future pensions are shaped.  Only then can they make informed choices among the investment options for their contributions.
  • Important factors for the successful implementation of pension reform include: sound investment policies to develop Armenia’s economy; prudent regulations to enhance public confidence in the pension industry and to protect the interests of pension fund participants; and maximum transparency and accuracy of reporting by all.

We applaud the Government of Armenia for building the foundation for this new system. It now needs to provide more information on how the new system will ensure the safety, efficiency, and impartiality of pension contributions for all Armenians.

Employers have some responsibility too.  They must embrace good corporate governance principles in order to reduce the shadow economy. The days of underreporting earnings, profits, workers’ salaries and social payments to avoid taxes must come to an end.

We believe that the new pension system is prudently designed to protect the interests of future pensioners. It will provide Armenian workers with the opportunity to improve their financial security in retirement by diversifying their sources of income, including saving for retirement in a private – private —  pension fund.

Let me add an important point here, which does not seem to be well known among the Armenian public.  Under this reform, the pension funds will be managed privately by two highly respected international funds managers – one French and the other German/Austrian with long track records of success.

Again, there is no denying that pension reform is controversial.  Every week there are groups of citizens voicing their concern over this new policy.  The Constitutional Court is looking at some specific aspects of the law.  This unease with the reform should not be surprising since it is a fundamental change to a system that has been in place for years.

We must also recognize that many Armenians lost their long-promised pensions when the Soviet Union collapsed.  That memory is still fresh.  In addition, there is a lack of trust among the government, Armenia’s institutions and the citizenry.  The government should work to close this gap in trust by seriously engaging its citizens, correcting any misunderstandings, listening to their concerns and working to address them.

This pension reform is the culmination of a ten-year reform effort by the government in close cooperation with international donors and experts.  It is a model used successfully around the world with numerous safeguards designed to protect individuals’ savings and contributions.  The reality is that the current system in Armenia is not sustainable.  Change – though difficult – is necessary.

In conclusion, I want to express our continued support for the successful implementation of this pension reform and our belief that the Government of Armenia, employers and workers will be able to implement these reforms for the long term benefit of all.

Thank you!  Best wishes for a productive conference.

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National Defense In Public Spotlight

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A Cabinet sitting was held today, chaired by Prime Minister Tigran Sargsyan.

 

Opening the meeting, the Prime Minister gave the floor to Minister of Defense Seyran Ohanyan. The latter reported that after the failed attempt of sabotage act committed by the special units of the enemy on the night of 19 to 20 January, there is some tension on the Azeri side. Meanwhile, our people should not have any safety concerns, since our soldiers are on the watch as always.

 

Reminding that the Government has been providing financial assistance to vulnerable households for gas, Prime Minister Tigran Sargsyan said this policy will be continued, and 1 cubic meter of gas will still cost 100 drams for such families. A decision to that effect is due within a week.

 

The Government approved a timetable for implementation of the program of activities (road map) to accede to the Customs Union and Common Economic Space of the Republic of Belarus, the Republic of Kazakhstan and the Russian Federation, through which public agencies will have a clear view of their participation in the activities and the timing provisions to implement them in accordance with the established procedure.

 

The Government agreed to the proposal for signing an agreement between the Government of Armenia and the United Nations on emergency import, export and transit of relief supplies and humanitarian assistance.

On the basis of reciprocity, the Government decided to exempt Japanese citizens with diplomatic passports from the requirement to obtain Republic of Armenia entry visas.

 

The meeting decided to extend until July, 2014 the temporary import customs regime for goods and equipment imported and not re-exported by Golden Field LLC. Note that the company has been manufacturing high pressure motorcar gas cylinders since 2007. The company employs some 150 people, with around 70 percent of the output exported abroad. Golden Field LLC has signed three major export contracts enabling them to export the entire volume of cylinders.

 

With another decision, the Executive granted a temporary import customs regime extension till September 2015 to VKS Armenia LLC, which is providing clothing services to a number of foreign organizations and, to this end, has set up production units in Yerevan, Vanadzor and Amasia. All the needed machinery and equipment is imported from abroad.

 

In conclusion, the Government decided to reorganize the Yerevan State University of Architecture and Engineering into National Fund of Architecture and Engineering. The newly established Fund will be in a better position to improve the quality of education through flexible and efficient use of property, closer cooperation with foreign investors and thereby increase its fiscal contributions.

The meeting discussed some forty items altogether.
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Society Should Be Enabled To Monitor Government Activities

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The first Cabinet sitting of 2014 was held today, chaired by Prime Minister Tigran Sargsyan.

Opening the meeting, the Prime Minister addressed the audience: “Good afternoon, dear colleagues. I wish you all a happy New Year and Merry Christmas. May 2014 bring us new achievements in public service. We are in for a hard work’s year. We have approved per-agency priorities for 2014. My first directive therefore is that you get them through to the public-at-large so that society could monitor the activities of ministries and agencies.

Down to the agenda, the meeting approved a substantiated 100-point program of government activities, as well as 77 priorities for the year 2014. The Government decided that the Industrial Development Fund shall be the main operator of the activities of export-oriented industrial strategy policy of the Republic of Armenia and the Government-approved annual program of State support for activities under the strategy of export-oriented industrial policy.

The Government next established that the Enterprise Incubator Foundation would be the main operator on the activities of the program of State support of the technology center of Gyumri. The decision provides that upon completion of the building at Gai-1 in Gyumri, before registration of the building, the maintenance of said real estate will be carried out by the Enterprise Incubator Foundation. Any such assets acquired with a view to implementing the annual programs of Gyumri Techno Park to a total book value of about AMD70mn shall be donated to Enterprise Incubator Foundation.

The Government approved the concept of a model disability assessment system based on the World Health Organization-drafted international classification of functions, as well as a timetable for its implementation.

The Government agreed to the proposal on signing an agreement between the governments of Armenia and Ukraine on cooperation in the field of seismic protection and a memorandum of understanding between the Governments of the Republic of Armenia and the Republic of India on founding a telemedicine network in Armenia.

Zvartnots Airport Development Project Approved

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Chaired by the Prime Minister Tigran Sargsyan, the Government held this year’s final session.

The Government approved the concessionaire-drafted Master Plan of Zvartnots airport development project for 2013-2017 in line with the arrangement signed between the Government of the Republic of Armenia and Corporation America S. A. on December 18, 2001.

“The concessionaire is believed to invest USD102mn in the project, which is recognized as the best in the CIS. The investment will on the one hand help enhance the quality of services and, on the other hand, develop tourism. This is a priority for us.”

The Executive approved the “Tourism Support Services 2014” program and its implementation schedule. The program seeks to enhance Armenia’s standing as a tourist-friendly and attractive country through active and effective marketing policies in the international market, diversify tourism products and ensure harmonious regional development.

Answering the Prime Minister’s questions, the speakers noted that tourism has already been promoted with the government’s open skies policies, which led to partly devaluation of the airfare. In this connection, the Prime Minister said that serious changes are expected in 2014, with the appearance of new airlines whose flights may create better conditions for the development of inbound tourism in Armenia.

The Government amended an earlier decree to establish that the basic pension will be AMD 14 thousand, with 700 dram seniority value added for the first 10 years of employment and 450 dram for each following year. Thus, the average pension will be 36 thousand dram in 2014 as compared to about 31 thousand in 2013.

An increase is also due in the disability and perished breadwinner’s retirement pensions paid to rank and file soldiers and their family members (from 16.400 to around 17.500). The scheduled rise in military pensions will be effective from July 1, 2014.

With its next decision, the government set the size of the old-age allowance at AMD14 thousand. Disability benefits will range from 14 thousand (third group) to 19 600 drams (first group). Funeral allowance will be paid to the extent of AMD 200 thousand as of January 1, 2014.

The meeting also amended another decision to lower the threshold set for family allowances. As a result, the scope of beneficiaries will be expanded by some 270 thousand people entitled to free health care.

In conclusion, the Prime Minister extended his New Year’s greetings: “I wish you all every success so that all the projects and goals that you have set before you may come true as they are aimed at improving the socio-economic situation, better our citizens’ life and raise the standard of living in the country.”

Recognition, Appreciation Of State Symbols Deemed As Primary Concern

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հհ կառավարության նիստ

The Government held a regular meeting, chaired by Prime Minister Tigran Sargsyan. Opening the meeting, the Prime Minister referred to the questions of submitting a new application to the Millennium Challenge Corpration and the introduction of the funded pension system starting January 1, 2014 (see separately).

After the agenda had been approved, the Executive proceeded to the discussion.

The Government approved amendments to the bills on the law on the Flag of the Republic of Armenia and on Coat of Arms of the Republic of Armenia that had been developed jointly by a Prime Minister-established working group on recognition, appreciation and popularization of State symbols. “Menk” Foundation for Preservation of National Values and in collaboration with other non-governmental organizations.

Tigran Sargsyan noted in this connection, “We have to thank the NGOs, who were proactive, consistent, and were interested in this issue. We also have to ask them to take under control and monitor the enforcement of this law considering the coat of arms and the flag are State symbols, which contribute to the patriotic education of our youth. We are very grateful to the civil society.”

The Government next approved the initiative to extend the enactment of the law on citizens in breach of the procedure of compulsory military service untill December 1, 2013, allowing those offenders over 27 years of age to pay the stipulated fee within the prescribed deadlines, return to the homeland and be safe from prosecution. With the next decision, the meeting considered the bill to be of top priority.

The above draft laws will be sent to the National Assembly in the manner established by law.

The Cabinet approved the fundamental document to be part of Armenia’s official thematic reports subject for submission to UN monitoring bodies and instructed the Minister of Justice to ensure its translation.

The Revised National Report of the Republic of Armenia concerning the European Social Charter was next approved by the session (reference period 2009-2012).

In conclusion, the Executive approved a proposal for signing a protocol on amendments to three agreements on cooperation between the CIS-member States. The agreements relate to the determination of the country of origin of goods, the Trade Fair and the development of congress activities, as well as a number of previously signed instruments on coordination of intergovernmental relations.

Customs reform strategy has been established

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The Government held a regular meeting, chaired by Prime Minister Tigran Sargsyan.

The Government approved the State Revenue Committee of Customs Administration Strategy Program for 2013-2014.
During the reform process of the legislative, institutional, human resource management, enforcement, information technology development and other areas numerous problems and tasks are revealed, methods and ways of their solution are reflected in the strategic document.
Prime Minister instructed to include the Customs Union agreements in this program document.
The government authorized the proposal about the creation of the agreement between the Governments of the Republic of Armenia and the Russian Federation concerning the Russian-Armenian humanitarian response center.
Tasks to be implemented by the Centre are the prevention measures in emergencies, urgent humanitarian assistance to the population affected by emergency situations, joint projects and programs, trainings for specialists, etc.
During the meeting the project between the Republic of Armenia and the International Development Association, as well as the International Bank for Reconstruction and Development and the Republic of Armenia “development policy first funding” and “the first development policy loan” credit agreements projects have been approved.
According to them USD 72 Million will be directed to the improvement of a number of industries.
Changes and additions are made in one of the government’s previous decisions; the government established the privilege procedure for handle relations with the income tax provided by the development cooperation agreement between the Republic of Armenia and the Republic of Austria’s governments
The government has allowed the “temporary import” tax regime terms extension for the imported goods by “Korsan – korviam construction” JSC Armenia branch until 2015. November 27.
Last year, the company has been recognized as a winner of the international open competition of the road reconstruction and improvement, imported equipments by the North-South Road Corridor Investment Program which development will continue this year as well, so there is a need for decision-making.
The government redistributes the 2013 budget made changes and additions in one of the earlier decisions of the Ministry of Urban Development and has allocated almost AMD 6 million for making a structural inspection of 19 high school buildings.
Pursuant to the President’s decree of 2013 November 6, about the “winter conscription and demobilization”, the government has decided to set up a military commission in order to ensure the overall management of the recruitment committee, coordinating the work of the Marz (Yerevan city) military commissions to confirm their compositions.

PM Congratulates Armenian Jewelers On Professional Holiday

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Տիգրան Սարգսյան, Ոսկերչի ազգային օր

Prime Minister Tigran Sargsyan welcomed yesterday the members of the World Congress of Armenian Jewelers at Government’s Conference Hall, who are in Armenia to attend the opening of National Jewelers’ Day-dated “Yerevan Show -2013” international jewelry exhibition.

“On behalf of the Government of the Republic of Armenia, I congratulate you on National Jeweler’s Day. Appreciating our jewelers’ contribution to the economic development of Armenia and granting their request, the Government established that the last Sunday of October should be marked as the jewelers’ professional holiday. The Government thereby emphasizes how much it values this sector that we consider to be an economic priority. I would like to congratulate all the participants of this wonderful event, wishing them successful and fruitful work.

Armenian jewelers have centuries-long traditions. It is our comparative advantage, which we are obliged to use. We have talented jewelers, prominent businessmen, and it proves that our talented people can compete and achieve great success in this area. The Government signed an agreement with the World Congress of Armenian Jewelers to lay Thursday foundations of public-private partnership and assume mutual obligations.

The Government has undertaken to consider jewelry as a priority sector and provide the most favorable conditions for its development. In this regard, the establishment of the free economic zone will be a strong impetus for the development of the jewelry industry in our country.

Concluding my speech, I wish to assure you that you have a reliable partner in the face of the Government of Armenia. We are ready to raise jewelry to such a high level through joint effort that our people may be proud of the achievements we have had and we will have ahead.”

 

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The Prime Minister next talked to Armenian jewelers coming from different countries, exchanging views on the ongoing projects, development opportunities and prospects.

“Yerevan Show – 2013” international jewelry exhibition was held on October 28 – the day following the National Jeweler’s Day. Participating in this exhibition are jewelry and watch producing companies, as well as jewelers, jewelry suppliers from more than two dozen countries.

 

President attended the opening of the Yerevan Show-2013 International Jewelry Exhibition

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Սերժ Սարգսյան, տիկին Ռիտա Սարգսյան,«Երևան շոու-2013»

President Serzh Sargsyan and Mrs. Rita Sargsyan today attended the opening of the Yerevan Show-2013 International Jewelry Exhibition at the Karen Demirjian Sport and Concert Complex. The event is being held on the next day after the Jeweler’s National Day holiday established by the decree of the Government of Armenia.

At the exhibition, which has become a traditional event, presented are world famous companies manufacturing jewelry and watches, jewelers, suppliers of jewelry from Armenia and from two dozen countries from all over the world. Over 140 buyers have arrived to Armenia to participate in the Exhibition, which according to the organizers, is a good opportunity for the local companies to find new markets for their products.

The President of Armenia toured the pavilions of the Exhibition, observed jewelry products presented by 125 local and foreign companies, tools and devices for jewelry manufacturing, conversed with the participants of the Exhibition about the problems of the area and programs for future development.

With regard to the events organized in the framework of the Exhibition, President Sargsyan was informed that there is an intention to organize a conference entitled the “Current Situation in the Jewelry Production: Problems and Prospects.” At the Conference, the Chairman of the World Armenian Jewelers Association (AJA) Gagik Gevorkian will present Union’s project on establishing in Yerevan a jewelry free trade zone. At the Conference introduced will be the newly established the AJA’s research Fund of the Armenian Jewelers.

 

 

Air Communications To Be Liberalized In Armenia

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A Cabinet sitting was held today, chaired by Prime Minister Tigran Sargsyan.

The government first approved a program to ensure competitive and continued provision of air transport services, established a project implementation task force and endorsed its composition.

After assessing several draft projects, it turned out that the policy of open skies will have the greatest positive impact on the economy, leading to jobs and growth in the number of passengers, as well as to reduced flight tariffs. The meeting set up a task force was set up, headed by the Minister of Economy and approved its composition.

Prime Minister Tigran Sargsyan reminded that there have been heated discussions over this issue and there were many contradictory approaches, from strict regulation up to the option of maximum liberalization.

“In order to take the best decision over this issue of strategic importance, the President ordered the National Competitiveness Council to sign a contract with one of the world’s most famous companies McKinsey. The latter hired the best professionals in this sector in order to develop a strategy for the Republic of Armenia.

The strategy was twice discussed with the President of the Republic of Armenia. McKinsey presented detailed reports and analyses, their experts visited Armenia several times and the result was a concept which is now submitted to your judgment.

According to the world’s best experts in this field, Armenia should go along the path of liberalization to promote GDP growth, create new jobs and make passenger traffic more comfortable and less expensive.

These are those basic principles reflected in our strategy, which specifies steps, measures and the timing of how these reforms should be carried out in the Republic of Armenia. We still have 5 days to work with the professionals of McKinsey in order to localize this paper to the maximum possible extent and make it feasible for our country. I am therefore asking all the stakeholders to continue working with the Minister of Economy. McKinsey experts will be available to provide all-out assistance, additional explanations and advice.”

The government passed a dozen decisions to amend relevant decrees adopted in 2002-2012 concerning the licensing process, the procedure for free granting of repatriation certificates, the approval of Dilijan International School program and a list of project implementation entities.

The Government approved a set of draft amendments to the Judicial Code of the Republic of Armenia and 8 other laws to create a new independent and self-governing judicial body – the Council of Judges, introduce a more efficient system of distribution of cases among judges, enact the principle of mandatory reporting by courts and judges, as well as to appoint court presidents for a limited period of time.

The meeting agenda comprised some 60 items altogether.

A Number of Facilities To Be Completed

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ՀՀ կառավարության նիստ

A Cabinet sitting was held today, chaired by Prime Minister Tigran Sargsyan.

The Government made redistributions in the 2013 State budget and amended one of its earlier decisions to allocate AMD61mn to the Ministry of Urban Development to implement expenditure programs, complete the ongoing construction sites with no due dates designed to provide financial support (reasonable proportion) of design documents, pay for the services rendered in 2012-2013.

In this context, Prime Minister Tigran Sargsyan addressed the issue of monitoring and completing the State-owned and unfinished construction sites: “The point is that we have an obligation to provide welfare housing to the citizens of certain social groups. It will cost us far less, if we complete the unfinished sites rather than start new ones. If there are any unfinished facilities, it is advisable to spend money on them. The same applies to unfinished facilities in the private sector. There are many buildings unfinished for more than 10 years now, and we can not watch them fall into decrepitude. We have to make a decision about what to do, if the private sector does not comply with the obligation of bringing them to completion. As a result, many problems arise due to these issues, which need discussing and tackling, inclusive of penalties or judicial processes.”

The Government has set an export insurance company in line with the government’s export- oriented industrial strategy. The company is meant to safeguard the bank of exporters or exporting company from the risk of non-payment by the borrower or buyer, create new ways insurance schemes for banks, lower interest rates and expand the banks’ coverage of export operations.

The Government amended one of its earlier decisions, allocating AMD8mn to Veterinary and Phytosanitary Laboratory Service Center SNCO for the purchase of materials and supplies necessary for honey expertise.

With the next decision, the Executive approved standards, health certification procedures and certification forms applicable to honey and other bee products fit for human consumption and due for export toward the European Union.

The meeting decided to earmark AMD22.5mn to the Ministry of Culture for transfer to Minas Avetisyan charitable foundation in order to ensure the fixation and restoration of “Armenia” fresco by Minas Avetisyan now on display at the House of Culture in Vahramaberd village of Shirak Marz. To remind, in the period 2010-2012, the Foundation fixed, restored and moved a number of key works by Minas Avetisyan, including “Meeting,” “Khachkar,” “Carpet Weaving,” “Yerkank,” “Spinning,” “Armenian Pastoral,” etc.

In conclusion, the Government decided to exempt from the payment of entry visa-necessitated State duties those foreign nationals featuring on the list of “Sahakyan” choir due to arrive from Turkey to Armenia for a concert tour this October 14 to 2013.

Customs Union Accession Action Plan Out

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10706_am_3A Cabinet sitting was held today, chaired by Prime Minister Tigran Sargsyan.

The government approved a program of priority actions to join the Customs Union: making an inventory of instruments applicable within the Customs Union and international treaties signed by the Republic of Armenia, considering the problems arising from Armenia’s adherence to the Customs Union and its membership of the World Trade Organization, separating the regulations into the following groups: regulations immediately acceptable to Armenia, regulations taking time to accept and regulations calling for further negotiations, translating those international instruments and legal acts necessary for ratification before joining the Customs Union etc.

The meeting approved the proposal on amendment N4 regarding the agreements signed by the governments of Armenia and the United States to improve efficiency in healthcare and welfare services, build up a more competitive and diversified private sector. The Government next approved the loan agreement signed on July 19, 2013 between the Republic of Armenia and the European Bank for Reconstruction and Development to the sum of U.S. $ 7 million that will be used to improve water supply in Yerevan.

The Prime Minister said he met with the U.S. Ambassador yesterday to discuss all the problems related to the signing of a new agreement with the USAID. “Those two decisions pave the way to a new agreement with the USAID, conducive to nearly USD 43 million in additional assistance,” the Premier pointed out.

The meeting went on to approve a program and a timetable for the development of e-commerce, networking and hardware procurement in Armenia.

Marz administrations were allocated AMD 50mn each from the government’s reserve fund to tackle priority issues. A total of AMD40bn has already been earmarked to that end since 2012.

Yerevan Town Hall was allocated AMD9bn to repair the pavement of streets and purchase new housing for the dwellers of damaged residential buildings in the capital city.

Armenia: Anyone Want a Factory?

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նաիրիտYerevan rubber factory may be moribund but its staff are still hoping it will bounce back.
By Arpi Beglaryan – Caucasus
CRS Issue 688,

At a major industrial plant in Armenia that shut down three years ago, the employees are still holding out hope that an investor will come in and revive production.

Staff at the Nairit rubber factory, located in the capital Yerevan, remain on the payroll even though nothing is being made there.

“This is the third year since production halted at Nairit, and 70 per cent of the staff sit at home on two-thirds pay,” said Serzhik Bezhanyan, a long-serving foreman. “The other 30 per cent come into work to keep the factory in decent shape and make sure that nothing gets stolen and that it doesn’t fall into disrepair…. They receive full pay, although they get it late.”

On April 29, workers held a demonstration outside the Armenian government, demanding payment of back wages for the last ten months.

Berzhanyan was less than optimistic that wages would now start being paid on time. After a similar demonstration in November 2012 last year, officials pledged not only to pay 11 months in wage arrears but also to restart production. Berzhanyan said there had been several previous protests followed by similar promises.

“Every time, after each protest, we get paid our wages for one or two months, and then the debts mount up again,” he said. “If it’s possible to pay out the money, why don’t they do so beforehand? If they need to borrow money to do it, why don’t they take out a bigger loan? We don’t understand what’s going on.”

Launched in 1940, Nairit played a key role in the Soviet economy as the only manufacturer of synthetic rubber. It also branched out into a range of other chemical products.

The Armenian government says it would take 512 million US dollars to get Nairit back on its feet – 146 million to pay off past debts, and 366 million for a modernisation programme.

In 2006, Nairit was acquired by a consortium including Polish, United States and Russian companies, with the Armenian state retaining a ten per cent stake. But the factory’s debts continued mounting until they exceeded the value of the shares, so control reverted to the bank which had underwritten the investment.

A big explosion at the factory in 2009 was a further setback for production.

In 2011, a tender to manage Nairit company was won by a German firm, but it subsequently disappeared.

On April 15 this year, Energy and Natural Resources Minister Armen Movsisyan said three companies had already submitted business plans. He would not name them, but said a major Russian oil firm, Rosneft, was now putting out feelers.

“Rosneft has not made any investment proposals; it’s only coming to that now,” he told the online news servicewww.1in.am. “Rosneft is one of the world’s largest companies, and if it has expressed an [interest], that has to be a major coup for Armenia.”

The Moscow newspaper Izvestia reports that Russia has agreed to offer a loan of 400 million US dollars for Nairit.

Even with possible investors on the horizon, there are question marks over whether Nairit can compete in a modern global economy, and what it would cost to get it into shape.

According to Tatul Manaseryan, an economist and head of the Alternativa think-tank, “With every year, the factory’s products become less attractive and important to the world market. We used to occupy a leading position, but now our rubber and other products are less competitive… than Chinese companies make.”

Manaseryan said that if the plant was salvageable, the right kind of investor would need to be found to take it on.

“There may be giant companies or international corporations for which the risk is acceptable, and which can afford to invest without tangible, immediate results or quick profits,” he said.

Bezhanyan said he had heard promises of imminent deals before.

“Every time, they tell us that talks are going on and that in time, the factory will operate properly again,” he said. “Some British people and Russians have been here to look at the factory, and there’s hope production will be revived, though we don’t know when.”

Although the Nairit factory has retained staff, Manaseryan warns that key technical expertise has been lost as Armenians leave the country in large numbers.

“We have to take into account that many of the engineers and technicians have already left Armenia. This exodus is not a new problem, but to retain the remaining workers and train up good people, we need to launch targeted programmes and reassure the remaining workers that they will keep their jobs,” he said.

Arpi Beglaryan is a reporter for the emedia.am website in Armenia.

 

Ministers To Shoulder Greater Responsibility

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6696_ru_3 A Cabinet sitting was held today, chaired by acting Prime Minister Tigran Sargsyan.

Pursuant to the President’s decree on 2013 spring call-up and demobilization campaign, the Government decided to set up a central military draft board to streamline conscription activities, as well as regional (including Yerevan) committees to provide for due coordination of the spring campaign in the regions. In addition, the Government approved the staffing of the central medical commission.

Based on the law on procurements, the Government amended one of its earlier decisions relating to the procurement procedure. Acting Prime Minister Tigran Sargsyan said the decision was adopted in compliance with the bid of numerous SNCOs and government agencies seeking authority to make direct procurements for up to one million dram worth of goods and equipment.

Another decision was adopted to establish technical specifications and maximum prices for some types of goods purchased by government department and public agencies.

Either this decision was commented on by the acting head of government. “All the ministers must keep this procedure under control as they are personally responsible for the problem. The Ministry of Finance has finalized the list of those articles we procure year by year – water, meat, pens, potatoes, fuel and so on. A stricter filter will henceforth be applied to determine the product types beyond which no procurements can be made. You will have to justify your choice, if you want to buy something specific, say a special kind of pen or paper. This is quite a tough arrangement as it rules out any purchase of goods at unreasonably high cost and puts the responsibility on the ministers.

The government established a procedure to follow while finalizing the citizens’ individual (personal) database, including for submittal of the 2012 data to the competent authority and incorporating them in the State pension system, as well as addressing inaccuracies in the applicable mechanisms.

The meeting approved the proposal on making redistributions in the loan agreement on Yerevan combined cycle power unit construction project, which was signed between the Government of Armenia and the Japanese Bank of International Cooperation in 2005.

The Ministry of Sports and Youth Affairs was allocated over AMD 1.5mn for transfer to Armenia’s badminton and chess federations for participation in the first international school sports festival of CIS-member countries due to be held this April 21 to 27 in Moscow.

The Ministry was provided AMD28mn to make available to Armenia’s national archery federation for hosting the second round of the European Grand Prix in Echmiadzin from May 27 through June 1, 2013.

NCFA Board Meeting Reviews Armenia’s Economic Development Trends, ANCF Programs

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10347_am_2Chaired by Prime Minister Tigran Sargsyan, the Board of Trustees of Armenia’s National Competitiveness Fund held a regular meeting in Office of Government.

After discussing the minutes of the last meeting and approving the agenda of today’s meeting, Prime Minister Tigran Sargsyan presented the economic results recorded in the first quarter of this year and in 2012.

Economic performance was said to have been on the upgrade in the first three months of 2013. In particular, the economic activity index was 8.7%, with the GDP standing at 11.7%. Compared to the same period of 2012, industry grew by 15.8%, agriculture – 2.3% and the tertiary sector – about 7%.

“Against a background of negative trade balance, exports tended up nearly three times as faster as imports. This was mainly due to the new export-oriented industrial strategy. We will push ahead with this policy line as we can see that our strategy is taking effect. By using its whole growth toolkit – credit funds, State guarantees and tax benefits – the State will continue to prop up the private sector with a focus on jobs and exports. The government has already approved 20 such programs. This year’s State budget was estimated implying a 6.2% growth index. Note that revenue proved AMD7bn up in the first quarter of 2013,”Tigran Sargsyan said.

The head of government reminded that FY2012 was completed with a 7.2% economic growth. According to the Prime Minister, the structure of the growth is particularly important as industry and agriculture boasted the largest share in the GDP, with a 9.3% rise recorded in agriculture and 14.5% in industry last year. A 48% growth was achieved in the field of water supply, recycling and waste management. The tertiary sector’s growth breakdown is as follows: wholesale and retail trade – 6%, transport – 14%, financial and insurance activities – 23%.

Construction was said to have broken even in 2012. The Prime Minister reminded that starting 2009 the main decline in the economy – 43% – was recorded in this very sector.

“In the following period as well, construction was the main deterrent force of the economy. Nevertheless, we were able to bring it to a breakeven point in 2012 and expect that the building sector will resume recovery to nurture economic growth this year,” Tigran Sargsyan added.

Macroeconomic performance was sufficiently good in 2012: budget deficit did not exceed the mark of 3%, inflation was within the planned target of 4%, and external debt was 37%, which is within the permitted threshold of external debt.

Coming to the future programs, Tigran Sargsyan stressed the need for continued improvement of the business environment. He reminded that according to the World Bank’s Doing Business report, Armenia has improved its position by 18 points ranking 32nd among 185 countries. The head of government said work will continue in this direction.

The Prime Minister next spoke about the reforms and programs implemented in the social, healthcare, inspection sectors and other areas.
In conclusion, the Board discussed and approved the auditor’s report on the Fund’s annual financial statement for 2012.