Turkey Puts Economical Pressure on Armenia
2005-09-15 16:03:59
Seeurope.net
[...]
The Armenian-European Policy and Legal Advice Center (AEPLAC), an EU-sponsored think tank, presented a report in July on the possible impact of the reopening of the land border between Armenia and Turkey. Turkey closed its land border with Armenia in April 1993, as an act of solidarity with ethnically close Azerbaijan, then in armed conflict with Armenian forces over Nagorno-Karabakh. [...].
Economic effects.
This situation has created some problems: [...]. As a result, transport costs in Armenia are 20-25% of nominal goods value, more than twice the world average and the highest in the region, comparable with those of Mongolia, which is ten times further from the sea. Reopening the Turkish-Armenian border would bring the Giumri-Kars rail link back into operation, ending Georgia's monopoly and improving Armenia's access to its markets, including those in the Middle East.
[...]
World Bank study
It has been commonly assumed that reopening the borders with Armenia's neighbours would stimulate its economic performance. In particular, a World Bank study in 2000 claimed that unblocking Armenia's borders with both Azerbaijan and Turkey would boost GDP growth by 30%. However, these estimates seem exaggerated:
[...]. They were based on the year 2000, since when Armenia's GDP has grown by some 60% in cumulative value. The structure of the economy has since changed [...] the share of production with a high transport component (chemistry, construction materials exports and machinery) has fallen [...] increasing the share in GDP of jewellery, information technology (IT) and services. Mining of copper and molybdenum has increased lately, but high world commodity prices have offset the export costs.
AEPLAC study
The latest review evaluates the impact of reopening the border with Turkey on main economic indicators and foreign trade in particular, in the short (one-year) and medium (five-year) terms, using general equilibrium modelling:
Short term.
No significant changes are expected in foreign trade structure. The economy will respond to some reduction in transport costs. Trade volumes with particular countries will change, but the trade structure will remain basically the same. This scenario expects a 0.67% rise in real GDP, to about 20 million dollars.
Medium term.
More substantial changes are expected in the volume and structure of trade between Turkey and Armenia. In particular, electricity exports will be equivalent to 20% of current (2003-04) production -- the study reckons this to be a 'conservative' estimate. Transport costs will continue falling owing to more efficient use of Turkish capacities by sea and land. The cumulative change in real GDP growth over the five years is estimated at 2.7%.
[...]
Critique.
The authors are probably correct that only limited growth in turnover may be expected, along with some stimulation of investment, in the short run. However, they may not be correct to expect only a mechanical continuation of the same trends in the medium term, with a decelerating rate of investment adjustment. They assume that technology investment will not grow apace in the medium term, and therefore some portion of foreign demand growth will be met at the expense of domestic consumption. [...] the term 'blockade' still deters potential investors in Armenia.
[...]
The AEPLAC study's conclusion that reopening Armenia's border with Turkey will have little economic effect probably overstates the case, but it may be welcomed by those who expect little progress on an issue whose resolution does not depend on the economic argument.
Note: Above are excerpts from the article. The full article appears here. Clarifications and comments by me are contained in {}. Deletions are marked by [...]. The bold emphasis is mine.
Seeurope.net
[...]
The Armenian-European Policy and Legal Advice Center (AEPLAC), an EU-sponsored think tank, presented a report in July on the possible impact of the reopening of the land border between Armenia and Turkey. Turkey closed its land border with Armenia in April 1993, as an act of solidarity with ethnically close Azerbaijan, then in armed conflict with Armenian forces over Nagorno-Karabakh. [...].
Economic effects.
This situation has created some problems: [...]. As a result, transport costs in Armenia are 20-25% of nominal goods value, more than twice the world average and the highest in the region, comparable with those of Mongolia, which is ten times further from the sea. Reopening the Turkish-Armenian border would bring the Giumri-Kars rail link back into operation, ending Georgia's monopoly and improving Armenia's access to its markets, including those in the Middle East.
[...]
World Bank study
It has been commonly assumed that reopening the borders with Armenia's neighbours would stimulate its economic performance. In particular, a World Bank study in 2000 claimed that unblocking Armenia's borders with both Azerbaijan and Turkey would boost GDP growth by 30%. However, these estimates seem exaggerated:
[...]. They were based on the year 2000, since when Armenia's GDP has grown by some 60% in cumulative value. The structure of the economy has since changed [...] the share of production with a high transport component (chemistry, construction materials exports and machinery) has fallen [...] increasing the share in GDP of jewellery, information technology (IT) and services. Mining of copper and molybdenum has increased lately, but high world commodity prices have offset the export costs.
AEPLAC study
The latest review evaluates the impact of reopening the border with Turkey on main economic indicators and foreign trade in particular, in the short (one-year) and medium (five-year) terms, using general equilibrium modelling:
Short term.
No significant changes are expected in foreign trade structure. The economy will respond to some reduction in transport costs. Trade volumes with particular countries will change, but the trade structure will remain basically the same. This scenario expects a 0.67% rise in real GDP, to about 20 million dollars.
Medium term.
More substantial changes are expected in the volume and structure of trade between Turkey and Armenia. In particular, electricity exports will be equivalent to 20% of current (2003-04) production -- the study reckons this to be a 'conservative' estimate. Transport costs will continue falling owing to more efficient use of Turkish capacities by sea and land. The cumulative change in real GDP growth over the five years is estimated at 2.7%.
[...]
Critique.
The authors are probably correct that only limited growth in turnover may be expected, along with some stimulation of investment, in the short run. However, they may not be correct to expect only a mechanical continuation of the same trends in the medium term, with a decelerating rate of investment adjustment. They assume that technology investment will not grow apace in the medium term, and therefore some portion of foreign demand growth will be met at the expense of domestic consumption. [...] the term 'blockade' still deters potential investors in Armenia.
[...]
The AEPLAC study's conclusion that reopening Armenia's border with Turkey will have little economic effect probably overstates the case, but it may be welcomed by those who expect little progress on an issue whose resolution does not depend on the economic argument.
Note: Above are excerpts from the article. The full article appears here. Clarifications and comments by me are contained in {}. Deletions are marked by [...]. The bold emphasis is mine.
posted by Vahe Balabanian at 8:35 AM
0 Comments:
Post a Comment
<< Home