What will Armenia gain and lose after lifting ban on the import of Turkish goods?

The lifting of the ban on the import of Turkish products to Armenia caused serious concern among local producers and experts. The ban lasted a year, the Ministry of Economy of Armenia announced its cancellation on December 30, 2021.

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Implications of the ban

Many are now wondering about the effectiveness of import restrictions and the benefits they brought to local producers and the country, however, there are no official reports about it yet.

JAMnews asked the Ministry of Economy for information on the impact of the ban on imports of Turkish goods to the domestic market, in particular:

• Whether new enterprises were founded, whether there was an expansion of existing ones and whether new jobs were created?
• What steps the government intends to take to prevent the risks associated with the lifting of the ban?

The ministry has replied that additional time is needed to collect the required information and the data will be released in a month.

While waiting for the official reports, entrepreneurs and experts have shared their own assessment of the situation. In particular, they talked about the shortcomings they noticed during the year while the ban was in effect.

“The state was unable to ensure the full implementation of its decision, which was due to both the lack of resources and the flexibility of the business, which found ways to get around the ban.

We saw Turkish goods produced in 2021 on the shelves, and no one asked trading companies questions about this. It was a half-hearted decision, it was necessary to ban not only imports but also sales. The state did not take this step, which is why both the course and the completion of the process turned out to be quite anti-climatic”, says Emil Stepanyan, one of the founders of the Export Armenia Association of Armenian Manufacturers.

A one-year ban could not benefit the domestic manufacturer, since it takes an average of three years to become a competitive enterprise, says economist Armen Ktoyan, an expert at the National Center for Social and Political Studies.

“If the state pursues a policy based on a certain motivation, then changes its policy, although nothing has changed in this sense, this cannot be perceived either in society or in the business community.

To take the place of Turkish goods, local producers made investments and established enterprises. Now, when the rules of the game are changing, they find themselves in a rather difficult situation. As a result, under these conditions, newly created local companies will not be able to compete with Turkish ones”, the economist says.

After the ban on the import of Turkish goods, many local producers took these steps, responding to the government’s call. They say the ban was too short for their business to succeed.

“We tried to quickly take places in shopping centers that were previously occupied by Turkish goods, increased production volumes by 30-40%. In 2021, sales of our products grew by approximately 45%.

But the decision to lift the ban is out of place now, it is too early to lift it. It was necessary to give at least one more year to the local manufacturer to restructure production, increase its volumes so that in the future there would be more opportunities for resistance”, says Tigran Karapetyan, founding director of Soft Papyrus, a household goods company.

Risks and benefits of lifting the ban

The government’s decision will deepen distrust of business sector towards him, says Emil Stepanyan, representative of the Export Armenia Association of Armenian Manufacturers:

“The lack of trust between business and the state is a serious problem. Moreover, the business has no confidence not only in the fact that it will not be deceived again but also in how professional the decision-making officials are. A situation has emerged when representatives of the business sector do not take seriously the statements of the state authorities.

The impact of the import ban has not been analyzed, and if there is no analysis, on what grounds is it extended or lifted? Statements that are made at the state level derive from the subjective approaches and personal hypotheses”.

The latest government decision is problematic not only for local producers but for the country as a whole, economist Armen Ktoyan believes:

“Foreign trade should be bilateral, this is the logic of the economy. When 99% of trade with any country is import, and exports account for a negligible percentage, this is not normal. This is an extremely unbalanced approach, and under such circumstances, trading cannot be considered profitable.

The economist believes that importing Turkish goods will only be of some benefit to consumers, who will be able to purchase relatively cheaper goods.

Will Armenian goods disappear from the shelves?

“The import of Turkish goods has already begun to affect the local producer. I can say that at the moment we are already producing more than we can sell. In the coming months, import volumes will increase, which will have a negative impact on us and other local producers”, says Tigran Karapetyan, founding director of Soft Papyrus.

Local producers are also afraid that they may lose their places in shopping centers.

“Turkish goods will return to the shelves of retail outlets, and this will be at the expense of local producers and goods imported from other countries. It’s no secret that Turkish companies are powerful – with a wide arsenal of marketing tools. Those who import goods from factories are also reimbursed for marketing costs, due to which they manage to buy places in retail outlets here”, says the businessman.

According to Armen Ktoyan, in the current situation, the residents of Armenia can support the local producer:

“In recent years, a certain behavior has formed in society – to buy locally produced goods instead of Turkish ones. I think if this approach is strengthened, it will allow newly created local companies to become more competitive. This mechanism will work if the consumer prefers local products for 100 drams to Turkish products for 70 drams”.

How to mitigate risks?

After the lifting of the ban on the import of Turkish goods, Economy Minister Vahan Kerobyan stated:

“As a body responsible for the economy, we are aware that we must closely monitor those companies that have opened over the past year and make sure that nothing threatens their development so that they do not leave the market”.

But entrepreneurs do not expect statements, but practical steps that support local producers.

“What do you mean by “we will be watching”? We are not satisfied with statements that go nowhere. Banning imports has created opportunities, but lifting the ban creates problems. The Ministry of Economy should organize meetings with each manufacturer, understand their problems and provide assistance”, says Emil Stepanyan.

According to him, now more than ever, local producers need government support.

Moreover, entrepreneurs and experts have specific proposals, and people hope that the government will hear them. In particular, they offer

1. Help keep places for locally produced goods in retail outlets

“There should be a state approach, at least at the level of verbal agreements, so that retail chains give preference to local goods. In each outlet, more than 90% of the places on the counters are paid. The state can subsidize local producers for a certain period in the amount of payment for these places. In this way, it is possible to ensure the preservation of places in retail outlets for local producers.

Today, in some large shopping centers in Armenia, locally produced goods are simply not available. Thus, the state can help the manufacturer to take its place in the retail chains”, says Emil Stepanyan.

2. Promote the export of locally produced goods

“We do not have any state export program. Export Armenia is the only platform where those wishing to export goods can ask questions and receive answers. In recent years, the association has submitted program proposals to the Ministry of Economy to promote business and export, but has not yet received a response”, says Emil Stepanyan.

3. Provide soft loans to businesses or subsidize loans

“Armenian producers are waiting for preferential loans from the state. The state should take on at least part of the risks, give producers the opportunity to use credit funds on better terms or state subsidy programs. And manufacturers, for their part, will improve the quality of goods, increase production volumes. In this way, we can reduce the cost of goods and become competitive”, entrepreneur Tigran Karapetyan believes.

While the government decides on its next steps, economist Armen Ktoyan urges manufacturers to look for innovative and energy-saving solutions, and consumers to support local producers.