Q. What is your assessment of the recent economic developments?
A. The overall macroeconomic situation in 2001 and the first half of 2002 was satisfactory. Real economic growth remains strong, around 9 percent, driven mainly by industry and construction. Average inflation was 3.2 percent in 2001 and is projected to remain around 3 percent in 2002. The Armenian Dram has remained quite stable during the past two years. The trade and the external current account deficit continue to narrow significantly as a result of the continued strong growth in exports. There has been some progress in improving the tax revenue collection during the first half of this year. However, the stock of budgetary arrears remains high at about $80 million, equivalent to 3.5 percent of GDP. The overall fiscal deficit is still one of the highest among the former Soviet Union Republics.

Q. Many Armenians believe that the privatization experience in Armenia has failed. What are your views on this issue?
A. Mass privatization has not worked very well in Armenia primary because the government did not make major advances in improving the business environment. Insider privatization did not lead to self-induced restructuring of firms. While case-by-case sales have clearly produced positive results, insufficient attention was paid such key issues as transparence and public relations. The poor handling of the ArmenTel privatization is the strongest reason for public dissatisfaction. The monopoly granted to OTE as one of the terms of the sale has been the cause of much controversy. The common public perception is that the sale has not resulted in sufficient improvements in the quality of service, while prices, especially for long distance calls, have remained high by international standards.

Q. How would you assess the role of Diaspora in the development of the Armenian economy?
A. Between 1990 and 2001, based on various surveys it is estimated that about 900,000 Armenians (equivalent to one-fourth of the population) have left the country. Almost two-thirds of emigrants were well-educated men of active working and reproductive age (20-44 years). If such an emigration trends does not slowdown it could deprive the country from its major long-term development resources. While depriving the country of a professional qualified and economically stable population, emigration is a substantial source of income support. About $ 250 million (equivalent to 12% of GDP). Is privately transferred annually to Armenia. The inflow of Diaspora investments to Armenia has so far been much below the expectations. In total during 1995-2001, Armenia received on average less than $30 of FDI per capita, while other transition economies in Europe attracted more than $100 per capita. Surprisingly large part of Diaspora investments came from Russia but not from North America and Western Europe. The Diaspora¹s attempts mostly failed due to the hostile attitude of insiders. During May 27-28, 2002 Armenian Diaspora conference in Yerevan, most participants underlined the corrupt bureaucratic system and clannish Armenian economy as a major constraint for FDI in country.