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ARMENIA: STEEP PRICE RISES "ARTIFICIAL"
By Naira Melkumian in Yerevan
Institute for War and Peace Reporting, UK
Nov 15 2007
Experts blame hike in food costs on a heavily monopolistic economy.
Rocketing food costs are angering ordinary people in Armenia and
giving the opposition a cause to rally around ahead of the presidential
election next spring.
Although much of the problem is due to external factors, experts
say that the rises indicate an economy that is excessively dominated
on monopolies.
According to date from the National Statistics Service, the prices of
bread and flour have increased by 24 and 29 per cent, respectively,
since the beginning of the year. Other food products, such as animal
and vegetable oils, have also been recording steep price increases.
"You never know what is going to happen tomorrow," said Anahit
Sarkisian, 40. "You wake up in the morning to find that prices have
doubled overnight. You can't stay calm when that happens."
The increases have mostly been recorded since the end of the summer.
Armenia has to import most of its food and agricultural products,
making it vulnerable to price rises on international markets that
have also affected other Soviet republics.
However, in Armenia the problem has been compounded by an
anti-competitive arrangements involving numerous local business that
have seen the price of vegetable oil and butter soar by an average
of 80 per cent.
"It's true that world market prices are growing, but in Armenia prices
have at least doubled," said Armine Akopian, who heads the analytical
department of Armenia's anti-monopoly commission. "In August, a
litre of sunflower-seed oil was selling for an average of 556 drams
[1.80 US dollars], whereas in October the price reached 950 drams
[three dollars], even though customs levies have remained the same."
Armenia has recorded double-digit growth figures for the past seven
years, following the economic collapse that accompanied the end of the
Soviet Union. However, poverty levels remain high and many complain
that the benefits of growth have not been shared out.
The Armenian opposition says the hike in prices is a disaster for
the whole population. Mher Shakhgheldian, a parliamentarian with
the opposition party Orinats Yerkir, accused the government of doing
nothing to address the problem.
"Of course, price rises are happening all over the world, but many
states have tried to protect their citizens," he told IWPR. "The state
ought to take care of each of its citizens and combat these negative
trends more actively."
Shakhgheldian said big businesses were dominating the domestic food
market and were forcing up prices. He argued that they should be
paying more tax, while the tax burden for farmers should be eased.
The government's anti-monopoly commission says it has no powers to
regulate the food market, while the only state body with a mandate
to do so, the Commission for Protecting Economic Competition, has no
real leverage and confines itself largely to conducting research into
the status of the market.
After monitoring retail sales of butter and sunflower oil, the
commission uncovered evidence of collusion amongst one fifth of
the market players. It fined 50 businessmen for unjustified price
increases, ordering them to pay a sum equivalent to two per cent
of their income in 2006. The total fine will not be more than 300
million drams (937,000 dollars).
Experts say the penalties being handed out at the moment are too mild.
"The current fines are small and do not remove the incentive for
businesses to do it again, because the profits they earn from
raising prices are far greater than the sums they lose by paying a
fine," said Abgar Yegoyan, head of the Consumer Rights Protection
organisation. "Many importers brought in their goods before world
prices went up, but they took advantage of the trend and their prices
went spiralling upwards."
Yegoyan suggested that the fine for complicity in anti-competition
deals should be increased to five per cent of annual income, and the
deadline for paying the fine should be halved from the current one
month to 15 days.
The price rises are have already caused panic buying by consumers. In
mid-October, Armenians rushed to buy sugar after the price rose,
causing traders to further double or triple prices. Some shops were
selling granulated sugar for 600-700 drams (1.84-2.15 dollars) a kilo.
One company, Salex Group, which is owned by member of parliament Samvel
Aleksanian, imports 84 per cent of the sugar sold in the shops. After
the company cut sugar prices in its chain of supermarkets, popular
anger turned on other retailers for keeping the price high.
"The panic benefited owners of small retail outlets, because in one
day they were able to sell an amount of sugar that otherwise would
have taken them ten days to sell," Ashot Shakhnazarian, head of the
commission, told journalists. He said that country had enough stocks
of sugar to last the next six months.
The Central Bank, which has the task of keeping inflation down, said
it was keeping to its target of holding the rate of consumer price
rises at around four per cent, give or take 1.5 per cent.
The price rises are hurting the Armenian authorities as they gear up
for a presidential election next year in which Prime Minister Serzh
Sarkisian will be the official candidate.
"The authorities are the first to suffer from an artificially-created
panic on the food market, because it triggers popular discontent,"
said deputy prime minister Hovik Abrahamian.
The government has already pledged to increase pensions next year
by 65 per cent and family benefits by 20 per cent, to reach 21,842
(68.50 dollars) and 21,089 drams (66 dollars) per month, respectively.
Minister of labour and social issues Agvan Vardanian told IWPR the
move was meant to cushion the population from the effect of rising
prices. He said the government hoped in future to make benefits
index-linked, as 24 per cent of the population count as poor and
seven per cent are below the poverty line.
"What's the use of raising pensions when prices continue to rise?"
complained 65-year-old cleaner Zoya Nikolayevna. "I still have to
work to support myself. The New Year holidays are approaching, when
everything will cost lots of money again, and you want so much to
give yourself a treat now and then."
Naira Melkumian is a freelance journalist in Yerevan.
By Naira Melkumian in Yerevan
Institute for War and Peace Reporting, UK
Nov 15 2007
Experts blame hike in food costs on a heavily monopolistic economy.
Rocketing food costs are angering ordinary people in Armenia and
giving the opposition a cause to rally around ahead of the presidential
election next spring.
Although much of the problem is due to external factors, experts
say that the rises indicate an economy that is excessively dominated
on monopolies.
According to date from the National Statistics Service, the prices of
bread and flour have increased by 24 and 29 per cent, respectively,
since the beginning of the year. Other food products, such as animal
and vegetable oils, have also been recording steep price increases.
"You never know what is going to happen tomorrow," said Anahit
Sarkisian, 40. "You wake up in the morning to find that prices have
doubled overnight. You can't stay calm when that happens."
The increases have mostly been recorded since the end of the summer.
Armenia has to import most of its food and agricultural products,
making it vulnerable to price rises on international markets that
have also affected other Soviet republics.
However, in Armenia the problem has been compounded by an
anti-competitive arrangements involving numerous local business that
have seen the price of vegetable oil and butter soar by an average
of 80 per cent.
"It's true that world market prices are growing, but in Armenia prices
have at least doubled," said Armine Akopian, who heads the analytical
department of Armenia's anti-monopoly commission. "In August, a
litre of sunflower-seed oil was selling for an average of 556 drams
[1.80 US dollars], whereas in October the price reached 950 drams
[three dollars], even though customs levies have remained the same."
Armenia has recorded double-digit growth figures for the past seven
years, following the economic collapse that accompanied the end of the
Soviet Union. However, poverty levels remain high and many complain
that the benefits of growth have not been shared out.
The Armenian opposition says the hike in prices is a disaster for
the whole population. Mher Shakhgheldian, a parliamentarian with
the opposition party Orinats Yerkir, accused the government of doing
nothing to address the problem.
"Of course, price rises are happening all over the world, but many
states have tried to protect their citizens," he told IWPR. "The state
ought to take care of each of its citizens and combat these negative
trends more actively."
Shakhgheldian said big businesses were dominating the domestic food
market and were forcing up prices. He argued that they should be
paying more tax, while the tax burden for farmers should be eased.
The government's anti-monopoly commission says it has no powers to
regulate the food market, while the only state body with a mandate
to do so, the Commission for Protecting Economic Competition, has no
real leverage and confines itself largely to conducting research into
the status of the market.
After monitoring retail sales of butter and sunflower oil, the
commission uncovered evidence of collusion amongst one fifth of
the market players. It fined 50 businessmen for unjustified price
increases, ordering them to pay a sum equivalent to two per cent
of their income in 2006. The total fine will not be more than 300
million drams (937,000 dollars).
Experts say the penalties being handed out at the moment are too mild.
"The current fines are small and do not remove the incentive for
businesses to do it again, because the profits they earn from
raising prices are far greater than the sums they lose by paying a
fine," said Abgar Yegoyan, head of the Consumer Rights Protection
organisation. "Many importers brought in their goods before world
prices went up, but they took advantage of the trend and their prices
went spiralling upwards."
Yegoyan suggested that the fine for complicity in anti-competition
deals should be increased to five per cent of annual income, and the
deadline for paying the fine should be halved from the current one
month to 15 days.
The price rises are have already caused panic buying by consumers. In
mid-October, Armenians rushed to buy sugar after the price rose,
causing traders to further double or triple prices. Some shops were
selling granulated sugar for 600-700 drams (1.84-2.15 dollars) a kilo.
One company, Salex Group, which is owned by member of parliament Samvel
Aleksanian, imports 84 per cent of the sugar sold in the shops. After
the company cut sugar prices in its chain of supermarkets, popular
anger turned on other retailers for keeping the price high.
"The panic benefited owners of small retail outlets, because in one
day they were able to sell an amount of sugar that otherwise would
have taken them ten days to sell," Ashot Shakhnazarian, head of the
commission, told journalists. He said that country had enough stocks
of sugar to last the next six months.
The Central Bank, which has the task of keeping inflation down, said
it was keeping to its target of holding the rate of consumer price
rises at around four per cent, give or take 1.5 per cent.
The price rises are hurting the Armenian authorities as they gear up
for a presidential election next year in which Prime Minister Serzh
Sarkisian will be the official candidate.
"The authorities are the first to suffer from an artificially-created
panic on the food market, because it triggers popular discontent,"
said deputy prime minister Hovik Abrahamian.
The government has already pledged to increase pensions next year
by 65 per cent and family benefits by 20 per cent, to reach 21,842
(68.50 dollars) and 21,089 drams (66 dollars) per month, respectively.
Minister of labour and social issues Agvan Vardanian told IWPR the
move was meant to cushion the population from the effect of rising
prices. He said the government hoped in future to make benefits
index-linked, as 24 per cent of the population count as poor and
seven per cent are below the poverty line.
"What's the use of raising pensions when prices continue to rise?"
complained 65-year-old cleaner Zoya Nikolayevna. "I still have to
work to support myself. The New Year holidays are approaching, when
everything will cost lots of money again, and you want so much to
give yourself a treat now and then."
Naira Melkumian is a freelance journalist in Yerevan.