New Constitution and Economy: Officials say amended Basic Law more efficient in dealing with monopolies

New Constitution and Economy: Officials say amended Basic Law more efficient in dealing with monopolies

The amended version of the Constitution, according to government representatives, will have a significant impact on the country’s economic environment as along with ensuring free competition in the country it should also fight against monopolies.

Representatives of opposition parties and groups and many economists, however, are skeptical, as they believe that political will is first of all needed to effectively fight against monopolies.

Critics cite as an argument the situation in such commodity markets as sugar or bananas where for years one economic entity has held a dominant position due to being able to use “vast financial resources and access to the levers of power.”

Monopolies are often called one of the biggest problems impeding the economy of Armenia. According to the World Bank data, Armenia has the most monopolized economy among former Soviet countries. According to official data, about 40 percent of Armenia’s market turnover is concentrated in the hands of businesses with dominant market positions. An economic agent is considered dominant in a market if it owns at least 30 percent of it.

Articles 59 and 33.1 of the amended Constitution deal with monopolies and economic competition.

Examples of the presence of monopolies in Armenia were cited by participants in a discussion hosted by the Media Center in Yerevan on Wednesday.

“In Moscow, for example, a price of a kilogram of bananas in Moscow is 420 drams, and the wholesale price is 300 drams (about $0.8 and $0.6), and here in Armenia it is twice as expensive, 800 drams (about $1.6). But when delivered to Yerevan bananas should cost 550 drams (about $1.1) per kilo maximum,” economic commentator Hayk Gevorgyan said, adding that the reason why it is not so is that only one company allegedly owned by a senior government official is engaged in importing bananas to the country.

According to economic commentator Babken Tunyan, there is a similar situation in the sugar market.

“Here there is also only one importer. Besides, legislation and tax policies are such that the import of refined sugar crystals and sugar production based on it is more profitable than sugar imports. In other words, even if someone tries to enter the sector and form a competitive environment, it is practically impossible because only one person, Samvel Alexanyan (the ruling Republican Party of Armenia), has the opportunity of producing granulated sugar in Armenia,” said Tunyan.

(Alexanyan, who is a member of parliament and is not allowed by law to engage in entrepreneurial activities, does not deny that a sugar importing business is run by his extended family. He denies, however, using his government connections to ensure the dominant position of his family’s company in the sugar market).

RPA lawmaker Vardan Ayvazyan, who heads the National Assembly’s Standing Committee on Economic Affairs, thinks that in both cases there are no legislative tools to detect a violation or an abuse, because the mentioned businesses import goods and pay customs duties.

“In the new Constitution we suggest that besides established state monopolies there be no other monopolies,” he explained.

“Approaches [in dealing with monopolies] can be different, but they should still be defined by law. But one of the options is the American model. In the United States the issue of Microsoft’s monopoly was solved as it was divided into different companies,” Ayvazyan said.