Armenia's Troubled Chemical Industry

Friday, 10 December, 2010

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Naira Melkumyan

Heavy debts and high energy prices have forced two important chemical plants in Armenia to a standstill.

Employees at the Vanadzor-Khimprom chemicals plant have not been paid for seven months, and staff at the Nairit rubber factory mounted a protest last week over four months of wage arrears.

“I’ve worked at Nairit all my life. How are we supposed to survive in these conditions? Prices are rising day by day and we’re living in the red,” Hovhannes Ghazaryan, one of the Nairit plant’s 3,000 workers, said during the protest. “We had no choice but to take to the streets. If they can’t re-open the factory, they should tell us so honestly, and we’ll look for something else to do.”

The protest ended after two days because Armenian president Serzh Sargsyan intervened and ordered management to pay off the pay arrears.

The Nairit plant’s director Vahan Melkonyan said it was struggling with debts of 4.5 million US dollars in back wages and 8.1 million dollars owed for electricity.

He said almost all the factory’s output went to countries where energy and raw material costs were lower.

“Under these circumstances, our product cannot be competitive on the market,” he said. “It’s a serious problem, and it has to do both with the Armenian economy and with the international market. It’s [also] a political problem – in order for the factory to function, we need the right conditions.”

A spokesperson for the plant said the government ought to be helping the factory get out of financial difficulties, given that it owned a share in it.

“Of course the owners of 90 per cent of the factory are largely responsible for fulfilling the investment programme, but the government as owner of ten per cent, is also responsible for the future of the plant,” she said.

In 2006, Nairit was acquired by a British-registered consortium including Poland’s Samex, the United States firm Intertex, and Yevrogaz of Russia. The Armenian state retained a ten per cent stake.

The government says it cannot interfere in the running of a private business, although a spokesman said it was committed to ensuring the company had a future.

Prime Minister Tigran Sargsyan has said the Eurasian Economic Community, a grouping of former Soviet states, is prepared to offer Nairit a loan of between 150 and 300 million dollars.

Energy and Natural Resources Minister Armen Movsisyan has blamed global financial problems for the trouble Nairit is in, but others argue that its difficulties predate the crisis.

“Nairit’s problems are unconnected with the crisis,” Vazgen Safaryan, head of the Union of National Producers, a pressure group uniting major companies, said. “The factory’s products are still in demand. The factory would not be mired in multimillion-dollar debts for gas and electricity if it had received state assistance. After all, ten per cent belongs to the state, so the factory should be the focus of government attention in order that things don’t come to protests by the workers.”

Safaryan said the authorities should be incentivising the industrial sector, specifically through short-term loans at low interest rates, if they wanted it to drive economic growth.

“Machine-building, electronics, chemicals and light industry were all traditionally strong here, but the transition to the free market resulted in a collapse. Owners didn’t have the resources to maintain production, and the state won’t interfere,” he said.

Hayk Mirzoyan, head of department for industry at the economy ministry, said the government had set out a new industrial development programme in January, and was now in talks with private companies to help them address their problems.

“The programme lays an emphasis on companies’ export potential, and on increasing export volumes,” he said. “Industry is growing, although not at the levels we’d like see. There is potential in industry, and that’s what we need to activate,” he said.

Naira Melkumyan is a freelance journalist in Yerevan.