Gagik Makaryan on problems of investors in Armenia and peculiarities of local labor market

YEREVAN, November 22. /ARKA/. In an interview with ARKA news agency, Chairman of the National Union of Employers of Armenia Gagik Makaryan speaks about the current situation in the labor market after the influx of mostly Russian nationals, as well as names major problems investors face in the country. 

ARKA - How has the Armenian labor market changed with the inflow of Russian nationals? 

G. Makaryan- The labor market hasn't changed much, if we mean labor force. Most of the Russians have not found jobs, but have registered as individual entrepreneurs, skillfully using the best and most attractive features of the Armenian legislation, which allows becoming a service provider while paying lower income tax. 

This means that the Russians, who provided services for certain companies, continue working for their companies after relocating to Armenia, have retained their partners in, say, the United States or Europe, and as individual entrepreneurs, business entities registered in Armenia, provide their services both to their former company located in Russia and directly to their partners abroad. 

Thus, we have not had a significant change of the labor market in this sense. This will happen if specialists from other sectors, except for IT, who want to work in Armenia come here. In all probability, it will happen because there are large numbers of (Ukrainian) refugees in Moldova, Poland and other countries. Also, the sanctions and economic problems in Russia will make many people want to come here. 

There is also the issue of salaries. Armenia pays good salaries in certain areas, but if a person moving here has to rent a house, possibly move his family or provide for them, these salaries will not be enough. You can earn more by doing business: becoming an individual entrepreneur, registering an LLC, and so on. But this does not significantly affect the labor market. 

ARKA - And what are the problems, in general, on the labor market? 

G. Makaryan - There are problems with staff shortage. Today we have hundreds of companies, which have been unable to fill their vacancies for a long time. We have a very big deficit of leading specialists in such areas as confectionary production, engineering and metal processing, production of composite materials, as well as in various other production segments, including mechanical engineering and construction. 

So, if the situation abroad worsens and these specialists want to come to Armenia, it will have a significant impact on the labor market. We have a shortage of welders, electricians, flow line operators, plasterers, plumbers, milling machine operators. And this leads to artificial delays and slows down the economy. For example, in construction, you have to wait until a crew is available, because it is difficult to find another one. In addition, labor costs increase, because those who have the right professions, understanding that they are in short supply, try to dictate their conditions. 

ARKA - Are there any mechanisms being discussed to solve this problem? 

G. Makaryan- If we speak about the stimulation of exports within the Eurasian Economic Union or mutual integration, one of the important issues is that export requires quality products, which have two components: good characteristics and competitive price. Good products and productivity can be created by a quality workforce. This means that it is important for exporting companies to have employees with complementary skills. 

And such professionals need to be trained. If we wait for the education system with its general inertia to train such a workforce, it will be late. But exclusive methods, through the creation of training centers, which will provide the market with the necessary specialists I have listed above, can significantly contribute to solving the problem. I mean vocational technical education. 

ARKA - And how do you see the prospects for development of the Armenian economy in the current internal and external conditions? 

G. Makaryan - Positive. I am very much encouraged by the fact that to a certain extent I see the formation of security guarantees in Armenia. It is important for both businesses and citizens to have security guarantees. Looking at the results we've achieved over the last month, there is hope that security in Armenia is starting to be guaranteed. However, the most important problem is the low level of micromanagement in state structures, their uncoordinated interaction with each other. Besides, Armenia has 8 obstacles in the way of foreign investments and none of them has been eliminated. 

ARKA – Which are these obstacles? 

G. Makaryan- One of the most important is obtaining permits to change the category of land plots. This is red tape, lasting for months and years, also huge bureaucracy in local self-government bodies, town halls and other state bodies.
Second, the situation with the weakening of the dollar and the euro against the dram is a big problem for foreign investment.

The third problem is the labor force, which from now on is not competitive, not so cheap and not enough.

The fourth problem are bank transactions. If an investor pays taxes in Armenia, he is free to transfer his/her income in the form of currency to his own country and to any place he likes. Recent developments, sanctions, and excessive caution manifested by banks have led to restrictions in the amounts, to a demand for additional certificates, and to an increase in the cost of these services.

The fifth problem is that land plots or territories convenient for investors are already occupied. Earlier some people bought hundreds of hectares of land or buildings, convenient for investors in terms of roads and communications. But the investor is forced to buy them not from the community, but from some persons at market price and sometimes even higher.

One last thing. Investors come with two goals: to create production in exchange for investment and to provide their products for domestic market needs and to be able to export. We have serious problems in the context of export logistics, which we can't solve. The Upper Lars border checkpoint (on Georgian-Russian border), transportation costs and so on. In the end the most important obstacle for investors is that in Armenia the laws change very quickly and frequently, and investors cannot adapt to these changes. -0-