The latest world financial economic crises impact to Armenian economy development and as a result, after several years of double-digit economic growth, Armenia faced a severe economic recession with GDP declining more than 14% in 2009, despite large loans from multilateral institutions. The economy began to recover in 2010 with 2.1% growth, and picked up to 4.6% growth in 2011, before slowing to 3.8% in 2012. Sharp declines in the construction sector and workers' remittances, particularly from Russia, led the downturn economy particularly in Armenian regions.
During the Soviet central planning system, in Armenian regions is developed a modern industrial sector, supplying machine tools, textiles, and other manufactured goods to former Soviet Union republics and consequently more of them at that time is presented as a agro-industrial. Previous inter industrial connection is pulling down and accordingly, majority is Armenian regions currently recognized as a rural activity specialized.
While decentralization has been one of the most significant parts of the transition reforms, its consequences for some of the countries in the post-soviet territory remain incompletely understood. In an overview of the general picture of the choices of local development program options Armenian communities, for the independent period economy enlargement issues is observed with only small share of priorities directly focused towards local business development. Thus the prioritization of local development activities in Armenia is largely unreflective of the “excellence” principle of having a “holistic approach including social, environmental as well as economic issues” in local development strategies.
Successful private enterprises create wealth, jobs and improved living standards in local communities but depend on favorable local conditions to achieve prosperity. Considering widely argued claims on the expediency of the promotion of businesses at local levels more emphasis would be needed on the side of authorities to the consideration of benefits, that might stem from promoting opportunities for development of businesses at local levels in Armenia.
While the current law on local self-governance foresees a role for local governments in business development, the statement of concrete obligations and tools towards their real involvement are far from being clear. Revisions of the relevant parts of the legislation would be needed in order to direct and facilitate the local governments’ real involvement in local business development. In addition, absence of prior practice of how to actually “do” local business development could be a reason of having very few communities choosing to get involved in developing businesses. While having a supportive and friendly legislation could largely contribute to guiding and empowering the communities for proceeding with developing businesses in their communities, there are still a number of things that the communities could do even without having the supportive legal institutions.
The regional economy recent years monitoring coming to substantiate, that is occur slow development trend in various marses Armenia, even though evidently with non harmonization expansion between regions (see table 1).
Table 1
EXPENDITURES ON PRODUCTION OF PRODUCTS, GOODS, SERVICES AND REALIZATION OF COMMERCIAL ORGANIZATIONS (mln. darms)
REPUBLIC OF
ARMENIA 2008 2009 2010 2011 2012
YEREVAN CITY 1 214 312.0 1 366 669.3 1 563 052.2 1 602 805.2 1 786 781.6
ARAGATSOTN 966 836.2 1 101 347.0 1 181 990.4 1 135 814.8 1 221 191.4
ARARAT 7 187.5 9 297.5 12 323.4 17 165.8 18 522.8
ARMAVIR 24 894.4 29 591.3 32 716.0 39 834.3 50 468.4
GEGHARKUNIK 3 852.0 5 273.5 5 142.2 6 242.0 28 613.5
LORI 10 038.2 13 881.9 55 378.1 73 668.1 78 491.8
KOTAYK 67 292.1 67 067.9 81 795.7 100 778.1 112 454.7
SHIRAK 10 171.8 15 090.9 12 350.2 18 033.0 21 003.9
SYUNIK 74 771.5 68 991.2 111 710.6 128 199.2 132 706.9
VAYOTS DZOR 3 109.2 6 713.3 7 304.6 7 293.0 13 041.7
TAVUSH 3 976.5 3 580.0 7 104.9 6 145.6 7 062.6
The weak financial positions and incentives are certainly one of the major factors limiting local governments’ activities in local business development. Consolidation of communities and establishment of intercommunity-unions to overcome the ineffective operation of numerous small local governments has been suggested before and is worth to be taken into consideration. Collaboration among municipalities faced with the same barriers could result in a strengthened position to address some of their common issues. In particular, a larger diversification of financing sources for development programs might be feasible under collaboration.
In addition, better administration and collection of local taxes and duties within the current legislative framework has been predicted to have the potential of leading to significant increase in local governments’ revenues. In this context, full administration of own tax collection functions by local governments has been recommended .
The regions of Armenia are facing the challenge of maintaining high economic growth which has been achieved today primarily due to private transfers. This does not create sustainable competitive advantages for the Armenian economy and will not secure Armenia’s long-term economic growth.
According to international Local and Regional Economic Development experience approach, has become more holistic mostly involves:
• value chain-, cluster- and business development service elements,
• a strong demand-, implementation- and market orientation as important intervention criteria
• a multi-level intervention approach linking network interventions at the business (or micro), institutional level (meso) and the policy level (macro)
• a bottom-up and a top-down approach,
• the promotion of concrete initiatives that create a joint learning and trust-creation process between public and private representatives (see fugure 1).
Businesses do not organize themselves according to bureaucratic regional borders but according to markets, supplier- and buyer relations. This is the reason why is not principally a public sector task but rather a network governance requirement integrating motivated private and public sector representatives with their different roles. This is especially important in former socialistic systems where central planning and institutional roles were very hierarchical and market governance structures were very weak. An important learning is that every economic development strategy, whether it is called cluster, value chain or business linkage, requires the strong involvement of the private sector
as the main target group rather than public sector-driven approaches. Nonetheless, business promotion requires clear but distinctive responsibilities on the part of the stakeholders, such as:
the coordination and strategic role of the public sector as well as its role in reducing bureaucratic
obstacles for firms,
the market-oriented and competitiveness-seeking role of businesses who look for suppliers and
buyers and opportunities in the market, and who organize themselves into associations or business
networks,
the strong role of supporting organizations like e.g. associations, technology-, financial- and training
institutions and consultancy agencies to match their supply of services with the real demand of businesses.
Top-down policy incentives and strategies
Macro Business Clusters and
Services business linkages
Intervention Supporting Network Market
levels tools orientation
Supporting Supportin Value chain Value g
Micro Factors relations
Local bottom-up promotion
Figure 1 Local economic development holistic approach
Therefore, new approaches for the country's development are required. There are three key spheres that require active institutional policy.
- Formation of a globally competitive business environment. Developed companies are only interested in the countries where total expenses of conducting business are lower than in comparator countries or where there are unique opportunities of creating new values. Most of these opportunities are conditioned by the business environment of a given country; this is why persistent improvement of the business environment is so important.
- Creation of new sources of growth. Even with the presence of a really favorable business environment, business expansion will require special resources and competences in certain sectors. For Armenia, with its limited natural resources, this may be compensated by technological, managerial and creative competences in the sectors where the rapid accumulation of these competences is achievable.
- Attracting the Diaspora resources. The third key element for Armenia with its large and globally integrated Diaspora, is the active attraction of Diaspora resources for breaking the information and reputation vacuum around the country; creating additional incentives for multinational companies (including those with Diaspora capital) for choosing Armenia as an investment destination; as well as extensive expansion of the resource base for economic growth.
Sources for a new growth in Armenia can be created through offering resources and competences in certain sectors which may be integrated into global value chains of international companies. In the case of Armenia, the desired elements of global value chains may be research and development, product testing, production of technological components requiring disciplined workforce of medium and high qualification, strong creative skills as well as specific managerial resources capable of integrating into international companies and securing the expansion of their businesses in Armenia. These competences and resources must reach a critical mass in a certain sector in order to attract the attention of transnational companies, and therefore, they may be created and modernized through focused investments.
Such investments may be directed to special education (connected with certain sectors) and creation of training and educational centers, specialized laboratories, obtaining of technologies and their adjustment, hiring highly-qualified (in some cases globally-recognized) foreign specialists as well as creating experienced producers. The key function of the government must be the role of a catalyst and coordinator of the process. However, coordination and active involvement of the business sector, educational institutions, professional associations and interested representatives of Diaspora is the precondition of a real success. The scale and novelty of these efforts require active attraction of foreign sources of competence and capital, in particular those of Diaspora, and not only. At the initial stage, they themselves can become autonomous sources for economic growth and, as a consequence, they will stimulate growth supported by private investments. At the same time, these efforts will be productive only with a distinct focus on certain sectors (in some cases - even on certain transnational corporations); otherwise they may be not demanded by the market.
Finally, the objective of those initiatives will be the creation of strong and effective clusters (geographically close, interconnected groups of companies and supporting institutions). The very presence of clusters, and not separate companies, makes the given industry attractive for transnational companies. On the other hand, the entrance of a large transnational company may stimulate the entrance of others and the development of the entire cluster. Taking this into account, in some cases it will be reasonable to create special infrastructures for certain large transnational corporations. Special strategies are necessary for companies seeking geographic diversification of development and production and striving for a region in the CIS and the Near East. For attracting such important players, the government may act as a co-investor providing land, buildings, infrastructures, and in special cases also tax privileges.
Figure 2 Suggested mecanizm for production prise stabilazation in Armenian regions
The strategy for institutionalizing learning and innovation, according to the GIZ Municipal and Economic Development Program in Armenia followed several aspects:
➢ skills development on innovative LRED methods: The GIZ Programme provides trainings and field practice on new methods and tools to promote an innovative means to analyze opportunities that strengthen local competitive advantages. In this context, a team of professional consultants were trained and new services developed (micro-finance fund, micro franchising system).
➢ organizational innovations: through the promotion of concrete economic initiatives new learning networks are initiated. They are oriented towards concrete economic improvements, entrepreneurship thinking: the GIZ trains service providers as well as start-up businesses directly in the use of entrepreneurship courses to realize new innovative business opportunities,
➢ innovation through matching: many Local and Regional Economic Development initiatives are oriented towards better harmonization the existing supply of services with the demands of businesses. The resulting new orientation can be interpreted as new innovative services.
➢ encouraging new market and value chain linkages like e.g. of food processors to new buyers in Yerevan supermarkets or the opening of selling-shops in local markets demonstrate new innovative ideas in the respective context,
➢ product innovations: the development of new local economic products like e.g. hiking zones (in Noyemberyan), agro tourism tours or even fruit processing initiatives (in Vayk) has contributed to new learnings on market demands
➢ process innovations: the alignment of the local stakeholders towards developing a common objective and common implementation procedures results in a new format of organization and process orientation that is very different to former hierarchical structures.
From our point of view, the main issue of current regional development program is production market prices settlement, which is to low for production expenses recovering. Hence, it is reasonable suggestions, concerning to price subsidiary mechanizm for production in Armenian regions (see figure 2). For this purposes, the goverment might take responsibiliaty to purchase by contractual prices 30% made production in regions, and the other 20% of product prices will be subsidiaries in case of market price decline. The rest 50% product made in regions, will be go through market pricing process, without supporting factors. In that case, will be work to directions for regional economic development holistic approach. That is, from one hand, coming in use top-down policy incentives and strategies from macro economy level, and from another hand, the free market relations tools will in applying and improvement process in slightly economy leveled marzes in Armenia.
Annotation
In Armenia, economic value-added opportunities, especially in regional areas, are still underdeveloped. During independent period, the country lost almost 30% of its inhabitants due to emigration. Revenues
from remittances have become the basic financial income flows for householders’, particularly from region areas. In article is presented the regional economy development ways with corroborate mix supporting factors, as a top-down policy incentives and local bottom-up promotions.
Key words: region economy development, top-down policy incentives and strategies, local bottom-up
promotion, price subsidiary, value added chain relations.
ՏՆՏԵՍՈՒԹՅԱՆ ԶԱՐԳԱՑՄԱՆ ՀԻՄՆԱԽՆԴԻՐՆԵՐԸ ՀԱՅԱՍՏԱՆԻ ՄԱՐԶԵՐՈՒՄ
Ճուղուրյան Արմեն Գևորգի, տնտեսագիտության դոկտոր,
«Հյուսիսային համալսարանի » պրոֆ.
Հիմնաբառեր. տնտեսության տարածաշրջանային զարգացում, “ուղղահայաց” խրախուսման ռազմավարություն, “ներքևից” լոկալ աջակցություն, գների սուբսիդավորում, արժեավելացման շղթայական հարաբերու¬թյուններ:
Տնտեսական աճի հնարավորությունները Հայաստանի մարզերում դեռև լիարժեք չեն իրացվում և զարգացման կարիք ունեն: Անկախացման տարիներին, ազգաբնակչության շուրջ 30%-ը ար-տա¬գաղթեց և հատկապես մարզային տնային տնտեսությունների հիմնական ֆինանսական ներհոսքերի աղբյուր հանդիսացան արտերկրում ձևավորված եկամուտներից փոխանցումները: Հոդվածում քննարկվում են տարածաշրջանային տնտեսության զարգացման ուղիներ, շեշտադրում կատարելով աջակցման այնպիսի համակցված գործոններին, ինչպիսին են «վերեևից–ներքև» խթանիչ տնտեսական գործիքները, ինչպես նաև տե¬ղական աջակցող ռեսուրսների ներգրավումը:
ПРОБЛЕМЫ РАЗВИТИЯ ЭКОНОМИКИ В РЕГИОНАХ АРМЕНИИ
Джугурян Армен Геворкович, доктор экономических наук,
проф. Северного университета
Ключевые слова: региональное развитие экономики, стратегия перпендикулярной мотивации, локальная поддержка “снизу вверх”, субсидирования цен, цепочка взаимосвязей формирования добавочной стоимости .
Возможности экономического развития в марзах Армении до сих пор нуждаются в полной реализации и совершенствовании. В период независимости, почти 30% населения Армении эмигрировало и следовательно, часть своих доходов в виде трансфертов перенаправило в частности в региональные домашние хозяйства. В статье трактуются пути развития экономики в марзах Армении, особое внимание уделяя применению комбинированного подхода факторов поддержки, таких как использование инструментов мотивации “сверху вниз”, а также привлечения локальных ресурсов развития.
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