Something to feel good about?: Armenia viewed as better for Doing Business & ‘efficiency-driven’

Two international reports released this week have indicated that Armenia has improved as an environment for doing business and reached a qualitatively new stage in its global competitiveness – a rare positive development amid falling economic indicators and a pessimistic outlook in Armenia.

The Doing Business 2010 report of the International Finance Corporation and the World Bank released on Tuesday ranks Armenia 43rd among 183 reviewed economies by the overall ease of doing business in the country, which is an improvement over last year’s 50th position. Armenia’s regional neighbors Azerbaijan and Georgia are ranked 38th and 11th respectively, a circumstance that in particular led Georgian President Mikheil Saakashvili to publicly boast of his country having moved to the “highest league of the world championship in doing business.”

According to the World Bank press release, progress in Armenia is conditioned by reforms in three major areas – establishing businesses, obtaining loan information and cross-border trade.

Economist Andranik Tevanyan, however, says despite improvement in obtaining loan information noticed by the World Bank, loans themselves remain hard to get.

“Yes, banks today work transparently and provide loans at certain interest rates. But are these loans accessible for ordinary people? This is already disputable, since in reality interest rates are high and a loan is not affordable,” says Tevanyan, head of the Politeconomia Research Center.

The other major report on Armenia released this week was the Global Competitiveness Report 2009-10 of the Geneva-based World Economic Forum (WEF). The report shows Armenia as retaining its previous Global Competitiveness Index and ranking of 97th among 133 reviewed economies. It also shows Armenia completing its move from the group of countries rated as “factor-driven” economies to the group of countries with “efficiency-driven” economies.

According to the authors of the report, Azerbaijan, which has a higher Gross Domestic Product and is ranked 51st according to its global competitiveness, is still behind Armenia in terms of competitiveness quality, or its stage of development, as mineral resources make up to 98 percent of Azerbaijan’s exports.

“In order to strengthen our positions and get to the next group of ‘innovation-driven economies’, Armenia needs to improve the efficiency of goods markets, technological readiness, as well as business environment, anti-monopoly policy and innovation activities,” said Manuk Hergnyan, head of the Yerevan-based Economy and Values research center, a WEF partner institute in preparing the report. “The current economic crisis conditions create more favorable conditions for creating motivations to take serious steps in this direction.”

Hergnyan believes this drastic change is necessary because the Armenian economy is currently on the decline because of dwindling private cash remittances and shrinking housing construction.

And in Tevanyan’s opinion, the most essential here is to follow an anti-monopoly policy. He says his research center has a draft project on how to implement this in practice and is going to submit it to the National Assembly for discussion soon.

“Today we need a competitive economic system, accessible and long-term loans and corresponding legislation,” concludes Tevanyan.