by David Zenian
Change is never easy, especially when it comes to replacing a deep-rooted centrally planned and controlled economy with a western-style entrepreneurship that forms the cornerstone of capitalism.
The going gets tougher when change means inflation, poverty and cuts in government services which were once taken for granted.
The old economic system has ceased to function, and the state no longer provides meaningful inputs in terms of raw materials, equipment, or just plain cash.
People must provide for themselves as best they can.
But despite the difficulties, Armenia remains one of the first states of the former Soviet Union to adhere to the principle of change, and in the three years since independence, keep its lead not only over its immediate neighbors, but at times even over Moscow itself.
"Some people in the west say we are not going fast enough ... maybe ... but fundamental changes have already taken place in more than one domain and we are well ahead of others in the former Soviet Union," Minister of Economy Armen Yeghiazarian said in a recent interview.
Western diplomats and economists agree, but are quick to add that bolder - and sometimes more drastic - measures are needed if Armenia is to put its communist past behind and join the ranks of the capitalist world as a full-fledged member.
"Some outsiders are quick in prescribing cures for our ailing economy... often without taking into consideration that some of these medications will produce allergic reactions that could hurt the patient," a government official said.
One such "bitter pill" has been the persistence by the International Monetary Fund that Armenian authorities eliminate all government subsidies not only on services, but on such vital staples as bread.
The IMF says maintaining the bread subsidy is draining the Armenian treasury, and the "bleeding should stop."
Not an easy request.
Today, producing a loaf of bread costs 60 Drams, but is sold to the public at government-operated bakeries for only 6 Drams. The same is true with electricity, telephones, garbage collection, and other essential services.
With the average wage of a working Armenian under 3,000 Drams or $ 7.4 per month, selling bread at a profit or at least recouping its cost along with that of electricity, telephones or garbage collection, could have devastating effects on the population in general - and on the government';s popularity.
"Let';s not forget that Armenia is on the threshold of its first post-communist Parliamentary elections in May 1995 and Presidential elections in 1996. Lifting bread subsidies could tilt the election results against the ruling incumbents," a western diplomat said, hinting at how some anti-government factions like the communists could utilize the move.
But as unsatisfied as some international organizations are with what they say is Armenia';s slow movement toward a market economy, they do not deny that under the circumstances Armenia has done a lot better than anticipated despite the crippling effects of the Nagorno Karabakh conflict.
For one, it has kept inflation down and currency fluctuations well under control. It has privatized agricultural lands, and is well on its way toward privatizing a large chunk of its medium and small enterprises.
Within months of independence, one collective farm after the other was dismantled and villagers were given portions of the land to cultivate on their own. Today, while not all farming is in private hands, what has been privatized - or 85 percent of the agricultural land - has already made a positive impact on the growth of the country';s agriculture.
In the housing domain, nearly all of Yerevan';s thousands of apartments have been given to their occupants who now have the right to sell their newly acquired properties. This in turn has led to a boom in the real estate market.
The same is true in the domain of trade and services - or the small shops that dot Yerevan';s streets - where 60 percent privatization has been recorded.
While agriculture and housing remain the shining stars of the Armenian government';s privatization program, progress on other fronts has been less encouraging.
"There are 4,750 objects - or enterprises - which need to go to private ownership. These include 2,750 small and 2,000 medium and large enterprises. Only 20 percent of these have been privatized, and this does not include major entities such as public transportation, electricity, water distribution, telephones and so on," a western economist monitoring the process said.
"The government has to unload these to cut down on its budgetary obligations. It has been done in countries like Brazil, and maybe one day the same will happen in Armenia," he added.
If international organizations tend to be more aggressive than government planners, they have also stopped short of disputing the progress made along the path of an economic transformation in Armenia.
"There are some disappointments, but we also have to give these young leaders high marks in some vital areas," said another western diplomat who declined to be identified "lest I give the impression that we are taking sides" on economic issues.
The free exchange of the Armenian Dram, the Central Bank';s ability to maintain a strict control over the supply of money in the country together with a tight grip over the inflation rate, have all been listed as among the plusses of President Levon Ter Petrossian';s administration.
According to independent statistics the Armenian national currency, the Dram, has only lost 14 percent of its face value vis-a-vis the U.S. dollar in the six month period ending in October.
And when the bottom fell out of the Russian ruble recently, the Dram held its own.
According to the same statistic, inflation - which spiraled during the first years of independence - has been dramatically lowered and kept at a manageable rate of 6 percent since July 1994.
But there is more to economic recovery than what any government can control - even if temporarily.
Because of the ongoing conflict with Azerbaijan over the future of Nagorno Karabakh, the blockade of Armenia continues which in turn has crippled its industry and growth potentials.
At last count in October, 80 percent of Armenia';s 3.5 million population remains on some kind of government payroll, with unemployment hovering above the 120,000 mark, and productivity 80 percent below capacity.
But the picture is not all black.
Statistics indicate that the Armenian economy, which hit rock bottom in 1993, is on the mend with slow but certain improvement.
"The blockade and its side effects have had a serious bearing on the Armenian economy, and not all is negative. The economic structure has changed, or adapted itself from a production base to a trade base. The private sector has taken off and there is a trade and housing boom. The movement in the right direction," a diplomat said.
Change is in the air.
