Armenian market’s inadequate response to global market situation: opinions

The business environment is the major reason why Armenia’s market promptly reacts to world price rises, whereas it does not respond to price reductions, Chairman of the Informed and Protected Consumer NGO Babken Pipyoyan told Tert.am as he commented on the decline in prices for flour.

The price for flour has decreased by AMD 30,000 (about €55) per ton since January, whereas the bread price has remained unchanged.

The State Commission for Protection of Economic Competition has confirmed the decline in the flour price to Tert.am. The Commission is not supervising the bread market because, in contrast to the flour market, it has no economic entities with dominant market positions.

“Business environment is formed with government and public control and necessary legal framework. But our government control is poor, while government support implies the best government control,” Mr Pipoyan said.

Public sector has no means of control, and NGOs exercise control as citizens. And such control is most effective not only with citizens’ help, but also by means of social networks. Legal problems are raised even by people who are not supposed to because it is their duty to draft relevant bills.

“Therefore, we have the business environment that we actually have.”

Asked about lack of competition with so many economic entities specializing in baking, Mr Pipoyan said that the bakery and dairy products markets, as well as other markets, are not properly controlled.

Speaking of the weight, he pointed out lack of control as well.

Vazgen Safaryan, Chairman of the Union of Native Commodity Producers, told Tert.am that different groups produce flour and make bread.

“One must establish ties between them to control price fluctuations. Control over bread makers must be established – price, quality and weight control.”

The price of flour imported from Russia has declined because of RUB depreciation as a result of oil prices, and this year has seen bump grain harvest in Russia. Besides, home-produced flour meets 50% of Armenia’s demand.

“Home-produced flour is expensive because of high prices for fertilizers and water. This does not allow us to produce cheap grain.”

The government should elaborate a relevant strategy of domestic grain production. As regards fertilizers, the government should re-operate the Vanadzor Khimprom plant to organize home production of nitrogen fertilizers instead of importing fertilizers from Armenia.

Mr Safaryan points out the need for local grain production for Armenia to be independent of grain import.
“Cheap grain seems to be imported to Armenia. But the same grain may rise in price next year. So for food security reasons, we must ensure at least 75% home production.”

According to sociologist Aharon Adibekyan, the reason for the unchanging bread price is that bread is made of the more expensive flour imported earlier.

He also points out the gas price and labor costs.

“We should consider changes,” he said. Despite a double decrease in the world oil price, we have seen only a 10% decrease in the petrol price in Armenia.

“If they sell at a low price, the price will fall. Economic calculations are quite delicate calculations. They are required for deciding on raising or reducing prices.”

Asked about the Armenian market’s prompt response to price rise, Mr Adibekyan said the reason is delicate economic calculations as well.