PM Addresses National Assembly with Annual Report on Government Program Results
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Honorable National Assembly Speaker,
Distinguished Deputy Speakers,
Distinguished National Assembly Members,
Dear Members of Government,
I am presenting the annual report on the results of the government’s program. According to Article 127 of the Law on the Rules of Procedure of the National Assembly, the Government submits a report on the progress and results of the implementation of its program to the National Assembly every year before March 1. In other words, our de jure report today should refer to the results of the government’s activities in 2019, but for obvious reasons, we cannot dwell only on the results of 2019. Therefore, my report will consist of 3 parts. The first part refers to our activities from January 1, 2019 till the start of the coronavirus crisis. The second part will be dedicated to the decisions we made during the crisis management and finally to our further actions. The following is the most important or final provision of the Government Program, which was adopted early last year in this very hall.
The activities of the Government of the Republic of Armenia for the next 5 years will be aimed at building a competitive, inclusive and export-oriented economy in terms of highly technological industry and environmental standards. One of the key provisions of the Program is to promote employment and reduce poverty. As you may know, 2019 was the first full activity year for the post-revolutionary government, which should have given us a full picture of the potential of the post-revolutionary government and the political majority.
Accordingly, it is very important to note that the highest level of economic growth since 2008 - 7.6% - was recorded in 2019, which is the highest for the EEU countries, neighboring countries and European countries. In other words, in 2019 we registered the highest economic growth in our larger region.
In 2019, economic growth was accompanied by an improvement in the structure of the economy, low inflation and stable financial indicators. One of the best results is that growth in the manufacturing industry was 12 percent in 2019. For the first time since 2008, the share of the processing industry took the lead in the overall GDP structure.
The highest growth was recorded in housing and public catering services, with an increase of 27.2% as compared to the previous year. The number of tourists visiting Armenia rose by 14.7%. The export of goods and services increased by 10.3% in 2019, with a tangible growth recorded in brandy exports - 29.4%, fruit wines - 70.2%, grape wine - 25.3%, and vegetable products - 14.3.
In the field of high-tech industry, there was a 30 percent increase in turnover, including computer programming, electronics, microelectronics and other high-tech directions. It is noteworthy that the export of medium-tech goods increased by 26.9%, and the export of high-tech goods - by 13.3%.
I would like to state that these indicators evidence that we have managed to comply with the provision of the Government Program, namely that Armenia should become a high-tech, industrial country with an export-oriented economy.
In January-September 2019, foreign investment inflows amounted to USD 2.2 billion, which is 465 million dollars or 27.2 percent more than in the same period last year, and 635 million dollars or 41.3 percent more than in 2017. During 2018-2019, the government managed to increase the state budget tax revenue by 505 billion drams.
Dear colleagues, this is more than USD 1 billion: the relevant budget figures have increased by 43.6%, and I want to emphasize that this is in tune with my statement issued before the revolution that budget revenue should increase by 35% in a couple of year.
In fact, within 1.5 or 1.8 years we have managed to increase the state budget revenue by 43.6%, and these funds were used in the following way. 199.1 billion drams went to settle the government’s outstanding liabilities to taxpayers, and de facto we solved the issue of overpayments that used to be the subject of heated debate for decades. Formerly, the tax inspectorate would ask taxpayers to pay 150 drams instead of their actual liability of 100 drams. In other words, we have returned a debt of 199 billion drams to business.
At the same time, 40 billion drams out of 199 billion drams is the debt that was previously the transitional overpayment of value added tax, which, according to the amendments to the Tax Code adopted in 2017, was, in fact, classified as a third type debt. In other words, there was a hint that the state is drawing a line and refusing this debt. But we, considering the over-execution of the budget revenues, considered that it would be a very good stimulus for economic activation and decided to repay that debt. And the balance of 306 billion drams was added to the state budget as tax revenue, which was later translated into greater capital investments, higher wages, pensions and benefits.
In 2019, the tax-to-GDP ratio was 22.3 percent, compared to 20.95 percent in the previous year, i.e. in 2019 we raised the tax-to-GDP ratio by 1.38 percent. This is a very significant figure, equivalent to 90.7 billion drams in additional tax revenues. And it is important to note that the volume of taxes paid by 1000 largest taxpayers rose by 13% in 2019 as compared to the previous year, and by 31% - compared to 2017. I would like to emphasize this to show that said tax revenues were not collected from small and medium-sized businesses, but mostly from large taxpayers.
From May, 2018 to the end of 2019, more than 87,000 new jobs were created or identified in the Republic of Armenia. As of the third quarter of 2019, the unemployment rate decreased by 2.1 percentage points as compared to the same period last year, and the employment rate increased by 2.5 percentage points. I am just saying this to show that the government’s policy of promoting employment and reducing unemployment had a very significant and tangible result in 2019.
In the year under review, 460 km of roads were repaired and overhauled, 110 km of which were funded by government subsidies, and this was largely due to additional budget revenues. According to the latest statistics from 2019, in 2018, the government managed to reduce the poverty rate by 2.2 percentage points to 23.5 percentage points.
Extreme poverty fell from 1.4 percent to 1 percent during the same period. I would like to remind you that the goals enshrined in the My Step bloc’s electoral platform implied eradicating extreme poverty by 2023, and we will succeed if we continue at this pace. In fact, I should state that we boasted the lowest-ever level of poverty in the Republic of Armenia, at least in the pre-crisis period.
The average nominal salary increased by 5.8%. On June 1, 2019, the monthly salary of servicemen rose by 30%, depending on the place and conditions of service. As of September 1, 2012, the salaries of about 38,000 secondary school teachers, 2,600 university lecturers and 10,000 first-level medical workers increased by 10-30%.
On October 1, the salaries of Rescue Service officers and junior staff increased by up to 52%. On January 1, 2020, the salaries of penitentiary workers increased by 30%. The minimum wage rose from 55,000 to 68,000 drams as January 1, 2020.
Benefits and allowances for some 64084 beneficiaries, pensions for 3307 military pensioners have increased since January 1, 2019, setting the minimum amount at 25500 drams. The retirement pension for 21785 recipients and 7583 long-service military pensions were raised on January 1, 2019, setting the minimum pension at 25,500 drams. Thus, the amount of pensions has increased by an average of 10% since January 1, 2020.
I would like to emphasize that since May, 2018, we have raised salaries, benefits, pensions for more than 1 million 100,000 people. At the same time, while it does not have to be directly funded by the budget, I would like to remind you that since January 1, hundreds of thousands of people saw their wages up due to the introduction of a flat income tax.
I would like to touch upon a topic that is being discussed for various purposes, namely the rise in the salaries of civil servants and public officials. I would like to emphasize again that yes, it was done by my decision, and it happened because, from the revolutionary platform of the Republic Square, I promised that the salaries of state employees would increase, and that promise was fulfilled. Why not through the payroll system: just because the current system has been deformed since the first day of its inception? We will transform it with your approval and support into a salary system.
I would like to say that we plan to increase salaries in the public administration system, especially in the judicial system, because we are convinced that this is the way to have an effective independent judicial system in Armenia. So much for salaries.
In 2019, the international reserves of the Republic of Armenia increased by 26.1% or about USD 590 million, reaching USD 2.85 billion at the end of the year. Armenia’s international reserves have never had such a level. The assets of the banking system have increased by 16.9% or 842 billion drams since the beginning of the year, the volume of provided loans by 16.9% or 528 billion drams, the volume of attracted deposits by 20.7% or 611 billion drams. International rating agencies raised Armenia’s sovereign rating as a result of assessments of economic indicators and policies. In particular, Fitch raised it to BB, Moody’s - to Ba3.
In 2019, non-residents’ deposits in Armenian banks increased by 48% or by 337 billion drams to 7 trillion drams. On the one hand, this trend goes in tune with the global practice of capital flows from low-interest markets to high-interest markets, and, on the other hand, it reaffirms confidence in Armenia’s economy, including in the financial system.
It is important to note that in 2019, the share of overdue loans in loans provided by commercial banks decreased last year, reaching a record low of 0.85% in December. What does it mean? This indicator speaks about the fact that as of December, the creditworthiness of the citizens of the Republic of Armenia, that is, the ability to repay loans was too high. In other words, we have never had such a low interest rate on overdue loans before.
As there was also an environmental component in the final part of our program, I would like to emphasize that the right to operate 4 metal mines was terminated during the reporting period. Three of the mines were gold mines and one was a copper mine. In 2019, 500,000 trees were planted in the Republic of Armenia.
You may know that we had planned to plant 10 million trees this year as a pan-Armenian action, but the crisis made its corrections, and we will implement our initiative in a little different logic. Last year water intake from Sevan was the lowest for the last 10 years. Less water had never been taken from Sevan over the past decade. At the same time, 26,140,000 cubic meters less than 170 million cubic meters of water provided by law was released. As a result of the legislative change, the government may apply to the National Assembly for additional water intake from Lake Sevan should a drought be officially declared in the country. By the way, I would like to emphasize that two of these points, at least this legislative initiative and the legislative initiative to change the minimum wage, came from the National Assembly.
I would like to cite a couple of key figures concerning the Armed Forces as an important indicator of our activity. I would like to state that 225 state-of-the-art video surveillance devices were installed on the frontline, 64 military positions were furnished with industrial electricity in the reporting period. 134 combat positions got permanent water supply, modular bathrooms were equipped in 35 positions.
You know that the Armed Forces have switched over to a new catering system. 74% of conscripts or 54 percent of combat positions benefit from the new system. A drastic stage is due in the nearest future, namely on the 8th day of this month. According to our estimates, the number of conscripts and soldiers benefiting from the new diet will have reached the mark of about 90% by that time, that is, this process is going very well.
I would like to note that the high economic indicators of 2019 were recorded at a new pace and in a new way in January-February 2020. In January-February, the economic activity index increased by 8.7%, industry grew 15.3%, construction - 5.8%, trade - 6.3%, and services - 11.2%. The consumer price index was 99.9%. In other words, consumer prices fell in the first two months of this year compared to the first two months of last year. While economists do not always think that this is good, but it is a very important indicator in terms of people’s living standards.
The average monthly salary increased by 10.4% in January-February. Exports rose 8.8 percent. I would like to emphasize again that the total amount of taxes paid by 1000 large taxpayers in the first quarter of this year increased by 11.3% as compared to January-March 2019, and by 37.4% as compared to 2018.
In fact, you know that the first coronavirus case was registered in Armenia on March 1, and we have been experiencing a crisis since March 13. Despite this, the tax revenue target was overdone by 8.9 billion drams in the first quarter of 2020. But I would like to say that at the end of January 2020, the chairman of the State Revenue Committee reported to me that we expect an overpayment of about 20 billion drams by the end of the quarter, but since the first crisis we have managed to make that overpayment less than half. The index was exceeded by 9 billion drams.
You may know that the government has declared a state of emergency, and now I want to talk about how we managed the crisis. Restrictions came as the first steps of the state of emergency. In general, the purpose of our first anti-crisis action was to prevent panic in Armenia, because we saw some panic in many countries.
The second most important task we have set for ourselves is to ensure that the healthcare system could live up to the task in connection with the coronavirus, that is, it could serve all those who might need medical care. I say this because we have seen that hospital capacity proved insufficient in many European countries: people in need of intensive care were simply hospitalized in parks, under trees, and so on.
To that end, we have at least tripled the number of 300 outpatient hospitals in the area of restrictions, making 1,500 beds; 150 beds will be commissioned in the coming days. In addition, we have prepared 600 hotel and hospital facilities for asymptomatic cases. In other words, you know that at least half of our cases, even more than half, constitute those patients who have the coronavirus with no obvious symptoms, no fever, no coughing, no sneezing, no pneumonia. Our policy is not to treat them, but to ensure that they are isolated so that they do not infect others. We have prepared 2,300 hotels to isolate contact people. About 6,000 people have been isolated so far. And I want to emphasize that it has been very important since the first day that we did not take any such action as might degrade the dignity of any of our citizens during their isolation and the anti-crisis measures. And I am glad to note that quarantine conditions in the Republic of Armenia have even come to the attention of regional and international media, as an example of how the state should treat its citizens, including in times of crisis.
During this time, we have already implemented 16 anti-crisis activities. I would like to emphasize that MPs took part in the discussions of our anti-crisis measures, and I would like to take this opportunity to thank our partners for effective cooperation.
As a result of said 16 anti-crisis measures, we have already provided targeted support to about 21,000 businesses with soft loans. More than 1 million people have received direct support from the government.
If you remember, from the first days of the crisis there was a lot of talk and suggestions that the government should oblige the banking system to give credit holidays by administrative decision, which could lead to disruptions in the stability of the financial system.
We have been in close touch with the Central Bank on this issue, without any administrative leverage, which has provided communication with the commercial banks, and I am glad to note that as of May 5, credit organizations and banks have offered over 472,000 credit holidays to 15,000 legal entities. 768150 loans of individuals and 16875 loans of legal entities were reconstructed.
I am well aware that it is actually very important for the public at large to understand the results of our 16 anti-crisis measures. Thus, do we have a measurable result? After all, from the very first days we feared that as a result of all this we might face a social collapse and a humanitarian crisis in the country.
I think it crucial that the financial market stabilized quickly. Some instability in dram exchange rate was seen in the second half of March, but the Central Bank intervened with about USD 90 million and the financial system regained stability.
Next, unlike many countries, including the developed nations, we did not have a market collapse, that is, our showcases were not emptied, and we did not have a situation where people could not buy the goods they needed from the shops.
I think it is very important to address inflation, which also showed some signs of instability; we were very effective, let me say, in handling inflation. Some products have become more expensive, I mean groceries. We can see products that have become cheaper, and we have products the price of which has not changed. But in general, I want to say that we have a completely balanced situation in terms of inflation in the market.
We witnessed some inflationary pressures in the fertilizer market. You know, fertilizers are very important for agriculture, but on the other hand, we have an unprecedented drop in the price of diesel fuel. Today diesel fuel is sold for 280-300 drams in the Republic of Armenia.
I would like to draw your attention to another very important issue, when for many years we faced the following problem, and when there was inflation in the international markets, our market responded at a lightning speed, but when there was deflation, it reacted too slowly. Today we have the opposite. I consider it very important to note that despite the rise in world food prices, food prices have fallen in the Republic of Armenia since October, and this is due to only one thing: the monopoly situation in the Republic of Armenia has been overcome. The same goes for the gasoline and diesel market.
Now let us see the results. Do we have any indicators which could evidence after all whether there is a welfare crisis or not in the Republic of Armenia?
I would like to provide some data that I believe to be sensational. As of April 29, 2020, 620,905 jobs were registered in the Republic of Armenia. We are talking only about the jobs with which people have received salaries, for which the income tax calculation has been presented, and income tax has been paid.
As of April 29, 62,000 people had received salaries. I would like to emphasize that in February, for example, there were 618,000 jobs in the Republic of Armenia. Last summer we recorded for the first time that the number of jobs exceeded 600,000. But now, at least as of today, we can state that the situation is fairly unpredictable amid the ongoing crisis; we do not know what will happen in May. Nevertheless, according to reports, more people had received salaries by April 29 than during the moth of February. At the same time, the cumulative payroll fund amounted to 123,883 million drams in April, with 119,700 million drams paid out in February, that is, as of April the citizens of the Republic of Armenia had received about 3-4 billion drams more than they did in February.
I am saying this to show that the Government of the Republic of Armenia has handled the crisis in a way that we can state with confidence the lack of a social crisis in the country.
Let me give you more sensational information now. You know how much the issue of utility bills was discussed. It once became the number one topic in domestic politics, so to speak, and some even wanted to counter-revolutionize under the banner of communalism.
You know that we have implemented 4 programs related to utilities to a total cost of 15 billion drams. This is true for a huge segment of the population, but note that some 2 billion drams of said 5 billion went as advance payment, that is, 2 billion drams went to the accounts of those people who had already settled their utility bills.
This can have 2 explanations. The first is the actual statistics that the vulnerable utility customers are the most conscientious ones in Armenia, and according to our calculations, 800 million drams were deposited on the accounts of this vulnerable segment as an advance payment. This means that they are exempt from those fees by 800 million drams.
According to our estimates, 1.2 billion drams went to the accounts of those who do not really need it. That is why we thought a lot about this decision, we hesitated because our biggest problem with anti-crisis measures was how to make it as targeted as possible, but since we did not have any other tool, we decided to use the customers’ electricity and gas bill records. As a result, we transferred about 1.8 billion drams to the accounts of people who did not need it.
Let me tell you, dear colleagues, I apologize for such a mention, including the fact that we have transferred an average of about 20,000 drams to each subscriber to the utility bills of the National Assembly. This applies to those who have consumed electricity, for example, in February of 25 thousand drams.
It is important to note that we were guided by data available as of February as the latter is deemed to be hardest winter month in terms of utility payments. And I want to once again call on those citizens who did not need to be supported to forward the amounts so received to vulnerable households.
Thank you to those who have already made that decision, that is, you will help us with that. We do not want money out of anyone’s pocket; we are simply asking you to redirect the money to the right addressees if you do not need it.
I am honored to state that the Government of the Republic of Armenia has been able, including with the help of the National Assembly, to control and manage the coronavirus-driven socio-economic crisis. This does not mean at all that the citizens of the Republic of Armenia will continue to live in the same way as they did in January or February. This means that fortunately despite many alarms, we do not have a social collapse and crisis.
But it is much more important to talk about the future, because it is wrong to believe that the crisis has been left behind or is disappearing; the crisis is just beginning. We are recording that we will face the crisis at least until next May.
In addition, I would like to record an exceptional indicator: with the active support and assistance of foreign partners, neighboring countries, Armenia- and Diaspora-based organizations, about 70,000 people have been repatriated since the beginning of March. 23,000 people did so following the declaration of the state of emergency.
Now, I wish to provide some statistics on arrivals and departures to and from Armenia. In the first quarter of 2019, 17,000 more Armenian citizens returned to the Republic of Armenia than the ones who left the country. On the one hand, this is good, of course as seen from the perspective of our repatriation policy, but on the other hand, a legitimate question may come to the forefront: Will these people find a job and make a living in the Republic of Armenia”
I am honored to announce that we have decided to rehabilitate, renovate and build more than 100 educational and healthcare facilities this year. In other words, the Government of the Republic of Armenia will implement 100 such projects at this initial stage. I am only talking about the start of construction of educational and healthcare facilities, and we hope that this will provide our seasonal workers who used to leave for work abroad with adequate employment on a regular basis, that is the program will be continued next year. Yet, it remains to see whether there are many companies or enterprises in the Republic of Armenia ready to apply for these tenders create new jobs.
This is our biggest apprehension. Last year’s experience makes us have such fears, because we did a lot of road construction work last year, and in practice 100% of our construction capacity was involved in those activities. In other words, we could have doubled the funding if we had had a sufficient number of applicants. I want to give you one example. Now the reconstruction of the road leading to Makaravank, Tavush region, has started, and I want to state that this road had never been asphalted just as it is now. In the meantime, we have been trying to repair the road for more than a year. We announce a tender, but fail to get qualified bids. In fact, construction companies are reluctant to attend further tenders because they are overloaded with the ongoing projects and cannot do more work.
Therefore, concerning the aforementioned 100 educational and healthcare facilities, I call on our construction companies to consolidate their efforts. Tenders will be announced in the near future. We will provide jobs, but we will also make very serious investments in healthcare and education.
I would also like to talk about the political situation, because as we know, democracy was a featured item in our electoral program. I am honored to declare that democratic stability has been instituted in the Republic of Armenia since May 2018. The Republic of Armenia is a stable democratic state.
You know that authoritarian stability had been established in the Republic of Armenia for many years, and against the background of authoritarian stability, democratic stability can sometimes give the impression of instability. And I want to state that democratic stability has been established in the Republic of Armenia. We have a democratic government, and nothing threatens the democratic stability of the Republic of Armenia.
I am honored to note that there is no such political, criminal or mafia power that can undermine the democratic stability in the Republic of Armenia, capable of questioning the nonviolent, popular, velvet revolution that took place in Armenia in 2018. It is noteworthy that last year the Republic of Armenia boasted an impressive growth in international democracy-related indices.
Now, what are the problems we failed to solve in 2019? We were unable to build an independent and creditworthy judiciary in the Republic of Armenia. Here, I would like to make it clear that we do not want a judicial system controlled by the government or the revolution or even the people; we want a truly independent judiciary in Armenia. If we had strived to engineer a controllable judiciary, a new puppet judiciary instead of the old puppet one, we would have solved it long ago. Moreover, 1-2 calls or even the absence of a call would be enough for that, but our political understanding is that democracy has no alternative in the Republic of Armenia; there can be no regression from democracy. I also want to state that an independent judiciary is the key to economic and political development, and we must move forward in that direction.
What was our biggest failure in 2019? Our biggest failure was the return of the funds stolen from the people of the Republic of Armenia. I must admit that we have failed there. This failure has both objective and subjective reasons. Although purely statistical, I have said that, for example, the Special Investigation Service returned 7 times more money to the state budget in 2019 than during its entire history. The National Security Service, the Investigative Committee and the Police together have recovered ten times as many public funds than before. But still, I think we have failed in this area, in the fight against corruption. Those failures have several layers, and I want to talk about those few layers.
First of all, I want to admit that there are dedicated, highly experienced professionals in our judicial system, and we have what we have, at least the results and the preconditions we have, thanks to the day-to-day work of those high-ranking professionals.
I did not want to make a declarative and political statement. But now I can state that today we have highly professional devotees in the law enforcement and judicial systems. In the meantime, there are also corrupt officers and traitors our judicial and law enforcement system, and this is a serious problem for us. A legitimate question may arise: What have you been doing over the past two years? We simply did not want and we do not want to mix the wet with the dry.
And I still want to remember the famous biblical story that I have referred to several times over the past ten years during my political career, I mean the destruction of Sodom and Gomorrah and, in this context, the dialogue between Abraham and God. When Abraham learned of God’s plan to destroy the cities of Sodom and Gomorrah, he asked God if He would spare them if He could find fifty innocent, godly people. God reassured Abraham that if He could find fifty righteous people, he would spare the city for their sake. Abraham then asks about a lesser and lesser number until down to ten people as God answers, “For the sake of ten, I will not destroy it.” Asked about only one righteous man living there, God told Abraham that He would let him flee the town with his family before showing his wrath.
I want to say that there are conventionally 10 or 50 non-corrupt people in the judicial system of the Republic of Armenia. The government and the parliamentary majority of the Republic of Armenia have not destroyed the judicial system, they have not destroyed it only thanks to those 10 or 50 just people.
I would like to thank those 50 righteous people from this tribune on behalf of the Government of the Republic of Armenia and our people, and I would like to say the following: Although there are no concrete results, but I am 100% sure that sooner or later the whole corrupt system that has existed in Armenia for many years will be exposed and rooted out with all its ramifications, key actors and mechanisms.
Rest assured that all corrupt officers will be held accountable, and we will return to the people what has been stolen from the treasury of the Republic of Armenia. I would like to express my gratitude and satisfaction with the fact that the National Assembly of the Republic of Armenia has approved the Law on Confiscation of Illegal Property.