Slag and Ash: What Does Serzh Sargsyan Conceal?

In recent days, the media has been actively discussing Serzh Sargsyan’s speech during the 16^th Congress of the Republican Party of Armenia. Most of his speech was dedicated to the presentation of data proving continuous growth in economy and welfare in Armenia. In particular, Sargsyan indicated that exports in Armenia reached 1 billion 485 million USD in 2015 compared to 985 million USD in 2006, emphasizing that currently GDP growth is largely (72%) generated in the export sector. Of course, data cited by Sargsyan are accurate but the shade given to them and their interpretation need adjustment.

In general, the export in Armenia is distinguished by high centralization since 5 commodity groups provide for 65% of total exports. The largest part is ensured by minerals, slag and ash with a volume of around 365 million USD (around 25% of total exports). Copper, molybdenum, zinc minerals and concentrates are exported under this article. In contrast, the largest part (30%) of the RA export commodity structure in 2006 comprised the commodity group of natural or artificial pearls, precious and semi-precious stones and precious metals in the amount of around 300 million USD. This commodity group includes diamond and jewelry products, during the production of which a larger added value is generated. However, currently export volume of this product has reduced to 193 million USD.

Mineral fuel, oil and oil products, bituminous materials and wax products have also had a large share in the export commodity structure of 2015 (7.25% share), as well as tobacco and tobacco substitutes commodity group (11.5% share), alcoholic and non-alcoholic drinks and vinegar commodity group (8.5% share). Hence, low value adding mining and raw material products continue to prevail in the RA export commodity structure.

All these sectors are characteristic of developing economies, they create low added value and have a weak multiplier effect. Thus, they have negligible impact on reduction of unemployment or improvement of welfare of the society. It is enough to note that only 9300 citizens worked in the mining industry in 2015 compared to 7600 in 2006. In parallel, the destructive impact of extensive mining on the environment is obvious. And the damage to the environment leads to deterioration of the health condition of ordinary citizens.

In such a situation, it is not clear what considerable economic benefits could certain increase in exports of a limited number of low-effect products bring to wide circles of the society.