Protectionism or competition?: Armenian producers worried over Turkish market challenge

Armenian producers fear they will have to close or dramatically scale down their production operations as a result of competition if the Armenian-Turkish border is opened and no regulations are put in place by the government.

Vazgen Safaryan, who heads the Union of Domestic Producers, said at a press conference on Tuesday that the government of Armenia should make a drastic change in its economic policies if it achieves the opening of the border in order to protect local producers that, otherwise, would find themselves in an “unenviable situation”.

“On the one hand it is beneficial for our consumer to buy cheaper goods, on the other hand, however, we will condemn our domestic producers to idling or closing their production. For this purpose, it is necessary to find conditions, with state assistance, and develop local production, otherwise cheap Turkish goods will devour the whole of our market,” said Safaryan.

Turkish goods worth a total of $269 million were imported to Armenia in 2008. Armenian exports to the Turkish market, meanwhile, were worth a modest $1.8 million. The main items exported from Armenia to Turkey were processed and unprocessed fur, ferrous scrap metals and aluminum foil. From Turkey Armenia mainly imports bitumen products, mineral fuel and knitted garments.

“Since our relations with Turkey were not regulated, such an imbalanced ratio was formed,” explained Safaryan.

In October, the Union of Domestic Producers is going to submit to the financial-economic commission of the Public Council a concept of protecting domestic producers and increasing their competitiveness.

“Our local producers need inexpensive and long-term loans. This should be one of the first steps. Secondly, certain customs obstacles should be raised to goods that can be produced in our country and their entry should be restricted as far as possible,” said Safaryan.

The Union also suggests that the government should reconsider its current tax and tariff policies.

“The gas tariff goes up, causing a rise in electricity and water prices. All this leads to a higher self-cost of domestic production and makes locally produced goods less competitive compared to other markets,” said Safaryan.

Despite these concerns, Safaryan said the Union also saw positive aspects in the opening of the border.

“Our goods today are transited via Georgia, which pursues a rather tough tariff policy in relation to Armenia. By opening the border, we will get conditions for exporting Armenian goods to Europe via Turkey,” said Safaryan.

Last week, Head of the International Monetary Fund (IMF) mission to Armenia Mark Lewis also positively evaluated the prospect of the opening of the Armenian-Turkish border.

“Turkey will become a new and lucrative market for Armenian foods and services. Besides, the opening of the border will reduce transportation costs,” said Lewis.

The IMF representative also said that this will increase the competitiveness of Armenian firms as well as improve standards of living of the Armenian population.

“Low transportation costs will result in less expensive imports, which will increase the population’s buying capacity,” added Lewis.