Mining Industry is one of the important sectors for the economy of the Republic of Armenia. Although the specific weight of the sector in the gross domestic product (GDP) is small and it can be some 2-3 percent, but the income from the export of its products is always considered a direction of significant importance for the economy.
Economist Suren Parsyan mentioned in a conversation with Iravaban.net that until 2022, since the Russian-Ukrainian conflict and Russian citizens moved to Armenia, the mining industry provided one third of Armenia’s exports.
Suren Parsyan, Economist
“It is 2-3 percent of the GDP, but it provides a third of exports. In other words, the mining industry has been one of the main sectors that bring foreign currency to our country in the last 15-20 years,” he says.
According to the expert, this is important in determining the exchange rate.
Exports of the mining sector are a serious counterweight to imports. “We import three times more and we need foreign currency to pay for it. In addition, the number of workers in the mining industry is approximately 10,000 people and the average salary in this sector continues to be consistently high. Now the field of information technologies, financial banking and insurance activities have moved forward, but this is an important circumstance,” Parsyan said.
Iravaban.net touched on the topic of average monthly nominal salaries in the RA earlier. According to the information received from the Statistical Committee, the average monthly nominal salary in the RA is the highest in Syunik and Yerevan, and the Zangezur Copper-Molybdenum Combine is located in Syunik marz.
It should be noted that Syunik is the most prosperous marz in the RA, the poverty rate here is 2.5 percent (24.8 percent in Armenia), at the expense of the mining industry.
“The mining sector is also a locomotive for other branches, for example, for transport, construction of various infrastructures, textiles. Mining companies implement various social programs for affected communities, etc. Of course, for the sake of nature and health, the sector damages the affected communities in short-term and long-term terms, but many active programs are also implemented,” Suren Parsyan explains.
The specialist notes that this sector is important for the economy in terms of providing tax revenues.
In 2023, the Zangezur Copper-Molybdenum Combine was the first large taxpayer of the RA. The company paid a total of 70 billion 881 million 967 thousand AMD.
“In 2023, the economy grew by approximately 9 percent overall, economic activity was 9.7 percent over 11 months, but mining declined by 5.7 percent. This is due to the decrease in the volume of copper concentrate extraction, it decreased by 8.4 percent, and zinc by 19.8 percent. A decrease was recorded here due to several factors, for example, the Teghut mine stopped its activity from time to time during the past year. In addition, copper from the Kashen mine of Artsakh was also exported from Armenia, which, of course, is not happening either.
And the volume of production of tuff, in the form of volcanic sawn tiles or blocks, increased by 43.3 percent, the volume of production of sand, gravel, clay and china clay increased by 41.8 percent, which is due to construction,” Suren Parsyan says.
According to him, exploitation of Amulsar can be important from the point of view of sustainable development of the mining industry, whose environmental problems still exist and solutions have not been given to them. In the framework of the 2024 state budget, the government has planned that Amulsar should be exploited, which should ensure great economic growth and according to state calculations, it will increase the GDP by another 1 percent, and the taxes paid to the state budget will amount to 30-40 billion drams.
As already mentioned, communications (including information technology) are sectors that provide high salaries in Armenia.
“The IT sector is multi-layered, games with winnings also fit under it. There are companies in Armenia that are also IT organizations, and it is quite difficult to say which part of them should be considered as totalizing activities and which part should be considered as IT. The taxes paid by those totalizers, the taxes paid by large IT companies cannot exceed approximately 30 billion drams. In 2022, a large IT company moved from Russia to Armenia and started paying taxes to Armenia in the amount of several billion drams. In the mentioned year, many companies opened their branches here in the RA and even if the employees of these companies are physically located in another company, their money is transferred to the RA. It was due to this that in 2022-23 we had a 41-45 percent increase in the IT sector, but we ensured that growth mainly due to the presence of the Russian companies. Local IT companies faced serious problems in 2022-23, reduced the number of employees, some were closed. Many workers with average and high salaries have a problem finding a job, but until 2022 there was no such problem, the employer was looking for the specialists, now it is the opposite.”
Iravaban.net has submitted a written request to the State Revenue Committee to understand what tax benefits apply to these two sectors: mining industry and information technology.
According to the SRC letter, no tax benefits are provided to the mining sector.
We cannot say the same about the IT sector. A number of privileges have been granted to the companies operating in that field.
In 2022-2023, a significant fluctuation of the exchange rate, particularly the exchange rate of USD, was observed and companies had to reduce the number of their employees.
According to the Government decision of 1 December, 2022, 10 billion drams of state support was provided to companies in the information technology (IT) sector.
This was intended to encourage companies to keep jobs. But even in that case, at the expense of Russian companies, the sector grew.
“The Government allocated 10 billion drams and what is remarkable is that mainly large companies benefited from this support. And there were cases when companies that had already stopped their activities took money from the Government. In other words, they worked in 2022, stopped their activities in 2023, but applied and received that money, and the Ministry of High Tech Industry did not even check whether that company was working at that time or not,” Suren Parsyan said.
Iravaban.net also contacted the Ministry of High-tech Industry and the Ministry of Regional Development and Infrastructure about the announced grants for the projects implemented by them in the fields of information technology and mining in 2021-2023, respectively.
We have such a picture:
In addition to this, in 2022-2023, the Ministry of High Tech Industry provided state support in the amount of x percent of income tax, which amounted to about 15 billion 243 million drams.
Let’s add that according to the request received from the Ministry of Regional Development, in the years 2021-2023, in the field of mining industry, with the support of the World Bank, the grant program “Armenia Mineral. Sector Policy II”” was implemented, the client was the Development Foundation of Armenia. Within the framework of the mentioned program, the strategy for the development of the mining sector was developed, which was approved by the RA Government on 11 May, 2023, by decision 730-L.
Suren Parsyan emphasizes that Armenia cannot afford to abandon mining.
“Even the most developed countries, USA, Germany, France, have mining industry. The state should not give up mining, but it should be required to have a responsible mining industry, in which case we should be able to use raw materials comprehensively. For example, when one ton of raw materials is mined, all possible minerals in it are extracted, and not only 0.5 percent is filtered and the rest remains.
The country’s policy should be aimed not at exporting raw materials, but at exporting finished products, and in the case of gold, we should export not gold bars, but gold jewelry, the additional result from which is greater. Yes, the Government should encourage, subsidize, implement support programs so that the mineral is turned into a final product,” Suren Parsyan concluded.
Alisa Chilingaryan
