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Armenian PM Defends Government Response To Global Crisis

Prime Minister Tigran Sarkisian has insisted that his government can minimize the global economic crisis’s impact on Armenia by implementing large-scale regional projects, “drastically” increasing public spending and providing hundreds of millions of dollars in cheap credit to local businesses.

“This aggressive spending policy by the state will help us neutralize negative consequences [of the crisis] and create jobs,” Sarkisian said in an exclusive interview with RFE/RL broadcast on Saturday.

The deepening worldwide recession is being increasingly felt in Armenia where economic growth has slowed down dramatically in the third quarter of this year. Official statistics show its Gross Domestic Product increasing by 7.2 percent in January-November 2008, down from 13 percent recorded in 2007. Economists anticipate an even more modest growth rate next year.

Sarkisian reaffirmed and defended the Armenian government’s strategy of dealing with the crisis which he presented to parliament last month. One of its three key elements is a significant increase in public spending on road and housing construction and other infrastructure projects.

In particular, the government plans to spend $250 million on completing the protracted reconstruction of Armenia’s northern regions devastated by the 1988 earthquake. According to Sarkisian, this alone will create 5,000 more jobs in the unemployment-stricken area.

“Parallel to that, we will drastically increase lending to small and medium-sized businesses,” he said, reiterating government hopes to borrow $250 million from the World Bank and other foreign donors for that purpose.

The government will need much greater foreign funding for several ambitious projects which Sarkisian said will also cushion the effects of the global crisis. Those include construction of a new nuclear plant and a railway connecting Armenia to neighboring Iran. Sarkisian spoke of “very strong interest” in the plant’s construction shown by foreign investors but did not specify potential sources of at least $1 billion needed for putting the project into practice.

The prime minister dismissed reports that the crisis is putting growing downward pressure on the national currency, the dram, and that the Central Bank of Armenia is spending heavily to prop up its value. “We do not intend to artificially interfere in the formation of exchange rates because that is fraught with many negative consequences,” he said.

Speaking during a visit to RFE/RL’s Yerevan bureau, Sarkisian also insisted that the government is on track to implement an ambitious reform agenda which he unveiled after being appointed prime minister in April. That includes measures to combat widespread tax evasion, improve tax administration and create equal conditions for all businesses.

The seriousness of the stated reform drive has been called into question by a continuing government crackdown on an Armenian business group owned by Khachatur Sukiasian, a rare millionaire businessman openly supporting the opposition. Several Sukiasian-owned companies were inspected by tax officials and accused of tax evasion shortly after the tycoon voiced support for former President Levon Ter-Petrosian. One of them, the Bjni mineral water plant, was forced to suspend its operation and put up for sale by the government last month after refusing to pay 4.2 billion drams ($13.5 million) in fines.

Sarkisian denied any political motives behind the tax authorities’ treatment of Bjni and stuck to the government line that it is part of a broader government crackdown on tax evasion. “It is obvious that Bjni committed serious violations, avoided fulfilling its tax obligations,” he said.

“Such violations were also found in many other enterprises,” added the Armenian premier. “Unlike Bjni, those enterprises accepted their guilt and met their obligations to the state budget, whereas Bjni has been trying to politicize the matter.”

Sarkisian argued that several other Sukiasian-owned businesses such as the Armeconombank commercial bank have not been penalized by tax bodies. “I am personally making sure that no illegal actions are taken against that bank,” said the former Central Bank governor. “Armeconombank is one of our best banks and it continues to thrive and has no problems [with the government.]

“If Bjni had operated as transparently as Armeconombank does, it would not have had problems.”