Impact of EU and Border
My mind was wandering last night and I was thinking about Turkey and the EU. If/when Turkey does get into the EU, Armenia is going to have a very large border with the EU.
Companies that do any manufacturing hate working in EU countries. The restrictions in the EU, not to mention the wages that have to be paid, make it unattractive for manufacturing. Asia is much better.
Why can’t Armenia, with its easy access to the EU, be another site for manufacturing? Why wouldn’t Armenians be just as good at manufacturing as people in Asia are? Think of the money saved in exporting the manufactured goods? Sure, it would be more expensive to import the things that you need in order TO manufacture, but the money saved in the export of the finished product may make up for it.
In China and Vietnam it is difficult to find English speakers to communicate with the companies (not in India and Hong Kong) - in Armenia there are certainly enough English speakers.
Armenia could do this easily.
All that would need to happen is:
1. the border with Turkey opened
2. environmental precautions taken
3. the barriers to foreign direct investment lifted
4. the powers that be would have to move out of the way! (easier said than done)
Thoughts?
Your thoughts are good. For today. Turkey is not going to be part of EU in a decade to come. What will happen till then? Will EU break down? Will Turkey continue the path or become fundamentalist islamic state? Will be there war between Kurdish Republic (of Iraq) and Turkey? etc etc.
As for manufacturing skills, you are right. When in perestroika years Benetton opened a factory in Armenia, I remember its representative was praising quality of Armenian production, telling directly that it was much better than Asian and was rivaling the Italian.
Comment by Գագիկ — 12/31/2005 @ 12:16 am
The only current manufacturing going on in Armenia that I know of is a kids’ clothing company Zutano has a grandmothers’ co-op making expensive sweaters and I remember reading 4 or 5 years ago about some police uniforms for the US being made.
Comment by Katy — 12/31/2005 @ 12:44 am
current manufacturing? just a few clothing companies? not true. not colossal in scale, but there’s more that going on. significantly more.
Comment by Onnik Krikorian — 12/31/2005 @ 2:12 am
But what FDI manufacturing is going on?
Comment by Katy — 12/31/2005 @ 3:34 am
ah, okay. FDI manufacturing.
Well, technically, on paper there are lots in the form of joint ventures. Grand Tobacco etc are examples of that.
However, in reality most are not. They are apparently listed as such (get in a foreign name — and usually an Armenian in the Diaspora) and you get tax allowances even if the foreign component of your company isn’t investing anything.
Comment by Onnik Krikorian — 12/31/2005 @ 4:15 am
more about the other side of the border:
“Turkey seems left with little room to manoeuvre. Islam Online
reported earlier this month, Israeli ex-commando units, now seconded
to various MOSSAD-connected corporations, are “operating” in northern
Iraq, training what look to be Kurdish shock-troops. It’s not exactly
news. The New Yorker’s Seymour Hersh wrote about this last year. But
what is interesting is the recent confluence of media and diplomatic
activity beginning to hum around Ankara…..
Turkey has, if not supported the American actions in Iraq, gone along
with the idea of a single, stable Iraq. Preferably an Iraq run by
an American client, like Saddam. But Turkey sees the current trend,
and the Israeli commandos play no small role here, will lead not to
a single, stable Iraq, but a Yugoslavia-like fractured and fractious
neighbour. A situation they fear will only empower the Kurds.”
http://www.pej.org/html/modules.php?op=modload&name=News&file=article&sid=3991&mode=thread&order=0&thold=0
Comment by Գագիկ — 12/31/2005 @ 5:34 am
Armenia is not a natural base for manufacturing (like China is now) as it requires cheap labor and an ability to bypass the Western standards in safety, environmental protection, etc. Also, the labor force is not so big. Most manufacturing plants in China or East Asia are large enough to achieve economies of scale (or there are many small manufacturing shops that work within the same production cycle). In labor and willingness to spoil our country for foreign capital to profit we cannot match China.
THe last 14 years produced a manufacturing base in Armenia that has a comparative advantage: jewelry and diamond polishing; food processing; cement and construction materials; metal processing (molybdenum).
It’s not enough for the borders to be open - the Caucasus/Eastern Anatolia has to be transformed into a single market or economic space, as Az, Georgia, and Armenia, and even Eastern Turkey are too small a market on their own.
Comment by Hovakim — 12/31/2005 @ 5:50 am
Hovakim is right. Further more, the EU will not have long lasting effect. We are already starting to see the EU fray with Britain demanding rebates and France and Germany at odds with the needs of the new eastern countries.
Armenia cannot count on a solid EU as an export partner and I feel that Armenia is a weapon for the EU. There is growing ethnic hatred in Europe as seen by many of our Armenian Diaspora in London, Munich, Vienna and Paris. Europeans do not see us any differnt than the turks or Iranians. With that said, the rise of ethnic hatred and a long for a “white” Europe will cause the EU to use the genocide as a tool to keep Turkey in the corner.
In short, Armenia must skip physical manufacturing as the Iranians with 15 million under the age of 30 and the Turks with 25 million under the age of 30 have far more access to labor. Armenia must be the knowledge workers and managers. The oligarchs must invest in pushing thier wealth into other countries and gaining control. Instead of a new fleet of Hummers, they should start new businesses outside of Armenia and change the flow of trade. It is only through intelligent decision making and strong capitalism that Armenia will become a force in the region.
Comment by Anush — 12/31/2005 @ 10:14 am
Interesting comments. Sure, a regional market is better, but you still need to manufacture locally. As Armenians did manufacture certain goods during the soviet years for export to other countries, one guesses that it could again. Of course, then that was Moscow who decided where things were built rather than the market, so maybe not. I’ve heard a number of Armenians in the Diaspora say that this region will always be poor simply because economically, nobody is too interested in it. natural resources are one thing, but yes, there are other places you can manufature goods in for less.
Interesting, re. Anush’s point, because the market is too small in Armenia, it is for this reason that some Armenian businessmen want to not only manufacture in neighboring countries, but also tap into their market. For example, recently Kocharian’s son’s father-in-law was in Georgia looking at investing in their tourism industry. At that time, Badalian said that other Armenian businessmen were interested in investing in Georgia because the Armenian market was too small.
One guesses they would love to invest in Turkey even more.
Comment by Onnik Krikorian — 12/31/2005 @ 12:35 pm
The link with the Asian countries is not a bad idea. But instead of becoming a production base for export to EU, Armenia should try to export its own production to the Asian region, India and China primarily.
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