IMF Shares World Bank Concerns On Armenia

The International Monetary Fund shares the World Bank’s view that the Armenian economy is dominated by monopolies and other “oligopolistic” structures seriously hampering the country’s development, a senior IMF official said on Wednesday.

“It’s a long process to go from a centrally planned Communist economy to a market economy,” she said. “Already a lot of progress has been made by Armenia. A lot of market mechanisms are now working in the economy. But there is a lot more to do.”

“More competition is needed in a lot of sectors,” added Oomes. “A lot of sectors are dominated by one or two large companies that have a monopoly or oligopoly. So we fully agree with the World Bank that this is something that should deserve the highest attention of the government.”

The IMF official referred to an unusually blunt warning issued by Ngozi Okonjo-Iweala, the World Bank’s managing director, during a recent visit to Yerevan. Okonjo-Iweala said Armenia can not achieve prosperity as long as the most lucrative sectors of its economy are controlled by a handful of government-linked businessmen. She also stressed the importance of reforming tax administration, creating a “strong and independent judicial system” and combating government corruption in earnest.

The Armenian government says it is committed to implementing such reforms. Prime Minister Tigran Sarkisian has repeatedly said that better tax and customs administration is key to improving the country’s problematic business environment.

“The problem is that a lot of large taxpayers are not paying enough taxes, are not paying what they should pay,” said Oomes. “So it’s important to make sure that there is no corruption and no tax evasion.”

Sarkisian declared early this year that large companies will be “the number one target” of his government’s stated crackdown on tax fraud. The Armenian parliament passed recently a government bill that allows the State Revenue Committee (SRC) to deploy permanent “tax representatives” in major firms suspected of underreporting their earnings.

Oomes reaffirmed the IMF’s disapproval of the extraordinary measure, saying that it only “opens the door to even more corruption” among tax officials. She also noted a “very slow” pace of reform within the SRC.

The head of the tax collection agency, Gagik Khachatrian, has long been dogged by corruption allegations made by opposition politicians and media. He is also believed to have extensive business interests, raising more questions about his commitment to putting in place a level playing field for all Armenian businesses.

“I have heard a lot of rumors but I don’t know the truth about whether or not Mr. Khachatrian is an owner of particular businesses,” Oomes said. “So I can’t comment on that.”

Copyright (c) 2009. RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave., N.W. Washington DC 20036.

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