The authorities must make the business understand that the embargo will last at least 3-4 years. Then the business will be more confident in investing into local production. It is not realistic to refuse Turkish raw materials (e.g. cotton) yet: even the refusal of finished goods will take time and effort.
According to the results of the first quarter of 2021, the production of a number of goods that were previously imported from Turkey has increased in Armenia. But for the embargo to really help Armenia’s economy, it must be guaranteed to last at least 3-4 years. Founder of the Expert Community Export Armenia Emil Stepanyan spoke to Sputnik Armenia about the nuances of the “Turkish embargo”. Aram Gareginyan held the conversation.
– How effectively does the embargo on Turkish products work?
– This ban came into force on January 1, 2021, for a period of 6 months. Such a short period is explained by the rules of the EAEU, according to which one country cannot ban imports from third countries for more than 6 months without the agreement of the others. To be precise, this is stated in paragraph 54 of Annex 7 to the Treaty “On the Eurasian Economic Union”.
However, not every business will want to invest in local production without guarantees for a longer period. Therefore, if the authorities want to maintain the embargo for 3-4 years, they must somehow convey this message to the business community. Then business will be braver to invest in import-substituting production, and we can hope that in three years Armenia will shed its dependence on Turkish imports of finished products.
However, few investors will rush to invest in local production, when the authorities constantly announce a six-month deadline. On the other hand, importers of Turkish goods are in no hurry to reorient themselves to third countries, especially since many of them bought for the future in 2020 in order to last it as long as possible.
To finally close the access of Turkish goods to the Armenian market, the authorities said they want to ban not only the import but also the sale of Turkish goods. But even here there is no certainty: the statement was made a month ago, but it is not clear whether practical steps will follow…
– If we talk about substitution with imports from other countries, similar goods were planned to be imported from the EAEC countries, Iran, China, Syria and Vietnam. However, according to the results of the first quarter of 2021, these countries are in no hurry to take Turkey’s place. Only imports from Iran have increased. And even then we need to check. Maybe some of the “Iranian” imports are the same Turkish goods…
– You are right, there is a lot of talking about Turkish goods leaking into Armenia.
The number of Turkish goods on the Armenian market has indeed decreased, but the demand for them is still quite high, so businesses find ways for imports. It is difficult to stop the flow completely with the ban. In addition – and this is an important detail – it is not the Turkish brands that are banned, but the products made in the territory of Turkey. And since Turkish brands are produced in many countries, some importers simply began to import the same brands from other countries.
One way or another, the ban creates great risks for importers: it becomes more difficult to deliver goods, there are more mediators. From all these problems and costs, goods become much less attractive.
Therefore, over time, they may die out “of their own death” or, at least, practically lose their influence in the Armenian market.
– In order not to lose our sense of reality, we must realize that we risk hurting ourselves more than we hurt Turkey.
That is correct. Just take a look at the numbers: export from Turkey amounts to approximately $170 billion a year, of which about $250 million, or only 0.15% goes to Armenia. On the contrary, in order not to lose the sense of reality, as you said, it should be noted that so far it is even Armenia which is in a difficult transition period. Imports from Turkey account for about 5% of Armenia’s total imports. This is not insignificant in general, but for certain groups of goods the dependence on Turkish goods is much higher than 5%. For example, before the embargo, approximately 50% of all clothing and footwear in Armenia came from Turkey.
There are many reasons for this: we must recognize that Turkish goods have an excellent price-quality ratio, and not every Armenian consumer can afford European quality for a great price. Turkish goods are also convenient for Armenian importers – a short distance, fast delivery, it is possible to import them in small batches, and to pay on credit.
“Therefore, the first one-two years may be very difficult. But in the end, hopefully, Armenia will come out of this import dependence and strengthen the position of domestic producers. I say “I hope”, not “I’m sure”, because this way will be difficult: a lot will depend not only on business, but also on government policy. If the state and business will not be able to effectively use the 3-4 years of the ban, if they cannot create many strong Armenian brands, if the ban is lifted, the Turkish import will simply sweep away the Armenian production, which has not managed to get stronger,” our interlocutor said.
Here, by the way, we cannot rule out a deliberate subversion by Turkey, which will offer Armenian importers products at specially reduced, dumping prices – precisely in order to bankrupt the fragile local industry of Armenia.
That is, we cannot rule out a scenario in which, in the case of a botched use of the term of the ban, the Turkish embargo can only end up harming us.
It is because of the high risks that talks about banning the imports of Turkish raw materials and equipment are premature. Businesses can reject Turkish raw materials on their own. But it’s premature to ban them at the government level. We need to digest the ban on finished products, and then we can think about a complete ban. For now, it is premature and rather risky to suggest such a thing…