The devastating impact of global inflation on the Armenian economy and artificial speculation in the country’s foreign exchange market are causing serious damage to entrepreneurs, who most often export goods to foreign countries. Armenian media write that now the competition of Azerbaijani goods in international markets is becoming more and more intense and is crowding out Armenian agricultural products. Therefore, over the past two months, the share of Armenian exporters in the market of the CIS countries and neighboring countries has decreased.
Chairman of the Union of Entrepreneurs of Armenia “Mantashyants” Vahram Mirakyan stated that due to the failed policy pursued by the government of Yerevan, in particular, its economic team, the position of Armenian exporters is deteriorating, and they lose in competition due to the too high cost of goods supplied to foreign markets. So, in January-April 2022, despite that the selling price of goods exported by Armenian entrepreneurs involved in the export of agricultural products to Russia, Belarus and other countries remained the same, the cost of exports increased, which led to losses for exporters. As a result, taking advantage of the current situation, Azerbaijani entrepreneurs, strengthening their competitive advantages in foreign markets at favorable rates, are ousting Armenians. This situation leads both to the loss of sales markets for Armenian entrepreneurs and to a decrease in the country’s international export balance. (Source)
Mirakyan stated that the corrupt officials of Armenia are the direct culprit of the current situation. According to Mirakyan, a similar situation is observed in the beverage export market, which is the country's most important export area. "For example, an enterprise exporting wine exported products worth $100,000, of which 10% is its profit. The entrepreneur will receive money for the exported wine, but with a 10% loss. At the same time, he must pay the state income tax, because, according to the documentation, it has a profit of 10%. This is such an absurd situation," he stressed.
Armenian entrepreneurs are asking the government to provide support to exporters in order to maintain the competitiveness of their products in foreign markets. Karen Khachikyan, director of the Ararat Abrikon alcoholic beverage factory, says that the Armenian dram has lost about 15% in value over the past month. Because over the past month, economic activity in the country has not increased much, and the country has not received enough foreign exchange to strengthen the exchange rate. However, the government allegedly instructed the Central Bank to artificially “cheapen” the dram in order to stabilize inflation, while entrepreneurs artificially suffer from exchange rate speculation.
"For example, at a price of 520 drams per dollar, we could still make a profit by selling goods with a cost of 500 drams. Now we have to sell goods with the same cost for 430 drams or raise prices. This means that our goods will not be able to compete in the near future with products from other countries," he explained.
In addition, exporters are forced to pay income tax, although they suffer losses. The fact is that the invoices indicate the currency value of the goods, while the dram exchange rate is not taken into account, and according to the documents, it turns out that entrepreneurs make a profit, which does not happen in reality.
The businessman did not rule out that some companies will have to cut the number of jobs and costs. According to him, entrepreneurs have not yet applied to government agencies or the Central Bank, but they hope for a speedy solution to the problem. Absolutely all our exporters suffer losses. If this process is not stopped, then Armenian products will become uncompetitive, and goods from Kazakhstan, Uzbekistan, etc. will replace them in the markets,” Khachikyan warned. (Source)
The words of Chairman of the Export Community of Armenia and the Mantashyants Union of Entrepreneurs are also confirmed by the foreign trade statistics of Azerbaijan and Armenia for January-April 2022.
The total volume of Azerbaijan's trade turnover for the first four months of 2022 amounted to about $15.9 billion, of which $11.8 billion are export products. (Source)
During the reporting period, Azerbaijan exported non-oil products worth $965.5 million, which is $268.6 million or 38.5% more than in the corresponding period of 2021. During this period, Azerbaijan exported $333.7 million worth of non-oil products to Turkiye, $191.7 million to the Russian Federation, $61 million to Georgia, $51 million to the Swiss Confederation and $39.4 million to the US. (Azerbaijan Export Review, 2022, January-April)
The share of fruits and vegetables in exports increased significantly, reaching $162.2 million, which is 23.6% more than in the same period last year.
The volume of Armenia's trade turnover for the first four months of this year amounted to $2.9 billion, of which $1.025 billion accounted for the export of products. Exports of agricultural products (fruits, vegetables, food and beverages) to Armenia stood at about $250-300 million, not counting exports of mining products ($332 million), precious metals and non-metals (130+148=$278 million), as well as other textile and industrial goods (about $400 million). That is, at least 3 times less exports from Azerbaijan were recorded. About $42 million worth of agricultural goods are exported from Azerbaijan per month, $13 million from Armenia.
Armenian Minister of Economy Vahan Kerobyan, touching upon other problems of entrepreneurs-exporters, noted that the customs-transitional process is one of the main factors in the occurrence of losses in the country's export balance. According to him, the long queues formed at the Upper Lars checkpoint inflict heavy losses on Armenian cargo carriers, including exporters.
The fact is that for the development of competitive enterprises in the international markets of Armenia, sustainable investments, new technologies and innovations are needed to maintain the production of competitive products. The excessive deficit of investments in this country also affects the activities of these export companies, which lose out in competition to foreign markets.
The increase in support of the Azerbaijani government for local exports, the allocation of export promotion funds to stimulate non-oil exports led to the formation of a class of exporters that are a stable and profitable pillar in world markets. Supplier companies of Azerbaijan, specializing in numerous export orders from abroad, have already taken their rightful place in international markets, which further enhances the competitive advantages of the “Made in Azerbaijan” brand. Today, private exporting companies, which have a special share and rating in the international markets in the non-oil sector, have a large market share in dozens of countries. (Azerbaijan Export Review, 2022, p. 14).
Apparently, the failed economic policy of the Armenian government, the exclusion of local exporters from state support, as well as ineffective decisions and approaches of regulatory economic bodies, to a greater or lesser extent, ruin the export sector, which brings at least some foreign currency. This leads to the loss by Armenia of an extremely small share in international trade and its transfer to Azerbaijan.