Robert Bassili: Armenian government should act with compassion as longer crisis may cause worse economic damage

Hripsime Hovhannisyan

Tert.am has interviewed Robert Bassili, an investor, philanthropist and columnist, about the economic impact of the novel coronavirus (COVID-19) and the consequent recession expected in the wake of the global pandemic. The founder and member of the board of directors of Ramsis Capital LLC shared his vision for the country's chances to overcome the economic difficulties by using its potential.

Mr. Bassili, today a lot of thinkers, politicians and economists predict a new reality of the world because of COVID-19. I would like to know your forecasts on the world economy. What are the expected changes? 

Every person, business and government has its level of income, as well as a certain amount of expenses, and savings (balance sheets). So this situation has created a hit to income and balance sheets; holes have been created, and I estimate these holes to be globally $20 trillion that needs to be filled.

Central banks and the government will play their role to fill the holes. Supply chains will be made less dependent on China and countries will seek to be less dependent on globalized supply chains. They will seek more diversified supply or more importantly, self-produce and prioritize the needs for each country. For example, rare earths and pharmaceuticals precursors, which are sourced from China, will be diversified to other countries.

This crisis will potentially be a "New Depression" depending on how long the lockdown lasts.

It is not possible to create real wealth and production by producing money and credit; all you can do is to fill in the holes. There will be a new world order, and the world will not resemble what we knew. So do we need to understand the value of money and credit? Depending on the way wealth will be created, changes may be very different.

This crisis is expected to be much stronger than the one we had in 2007-2010. What is your opinion on that? What could be the implication behind the thesis?

The important question is what happens to those people who businesses collapse, and what happens to all those who were working for those businesses? What happens to those people? They will fall to poverty and the bottom of socio-economic society. The real economy of goods, services and production will fall below the 2008 events and be closer to the situation comparable to the 1930-1945 “Great Depression” (in reference to the percentage of the hole, unemployment and that the type of impact).

There is a real risk of a revolt happening about a lockdown, and the second wave of populism. Death rates globally do not justify the lockdown we are seeing. The US is likely to open up and try to reignite its economy - which, as we know, is already in trouble as unemployment is sharply increasing.

What should countries do to overcome the crisis? Do you see any willingness by them to help people or assist in businesses?

Countries around the world will try to find their own way, depending on their national personalities and necessities. Globalism is going to take a major hit. As I said, we would need to revalue how wealth is created and the intrinsic value of money.

Once again, we need to look at the holes created and the solutions that will need to be made on the level of income and the savings (balance sheets).

Countries will also need to make these decisions :

1)  Human life relative to economic activity;

2) Necessities relative to luxuries, and

3) Who will and should benefit from the new world order?

The changes in fiscal and monetary policies around the world should produce a huge amount of money and credit which will be great for many of those who do not have enough money. It will support many businesses that would otherwise be shut down, hospitals and other necessary organizations, people lacking the resources to buy essentials, and, with time, respirators and other things needed to fight the virus.

I would like to know your opinion about Armenia. What are your forecasts on our country's economic future?

There is a real risk that the global banking system will collapse with notable exceptions. Armenia's banking system is well positioned in that sense.

Considering the configuration of globalism and the fact that Armenia has already two closed borders [with Azerbaijan in the east and Turkey in the west], this is where Armenia is exposed. So we need to ensure we look at the economy and find solutions from re-engineering the economy. And I am looking at the civil behavior in Armenia. as this will determine the future economy.

Self-sufficiency will need to be a priority when we talk about the economy coming back. I would like to highlight how this will change: Armenia was operating in a world where it would source what it needs from the most efficient location and cost. That will not happen anymore, and it [Armenia] will need to revert to domestic production. There will be a need to think what we need.

Armenia will need to go building basics.

Is there a clearly outlined plan for overcoming the crisis? What should Armenia do in that connection?

Armenia's conditions are different from those of other countries. I think that the sensible thing is to protect the at-risk population while keeping things as normal as possible. The government should act with compassion; nonetheless, the longer this goes on - given that tourism, hospitality, entertainment and some aspects of higher education are all affected - the worse the economic damage and the more critical and harsher the recession/depression and the revolt from the society

The Government should do whatever they can to maintain employment - subsidizing employers to keep employees on by subsiding rents or preventing evictions. The idea is to try to keep businesses maximum alive and connected to their employees.

I know you intended to make investments in Armenia after the  [2018] revolution. What are your achievements so far?

In June 2019, we joined a consortium of potential investors from the United States and expressed our interest to the Government of Armenia to invest between $100 -$300MM into a project. We received initial answers back, and I would say that we are now evaluating the current financial events before considering the next steps.