Layoffs Carry Protest Potential

The worldwide slump is costing Armenian miners their jobs and discontent is mounting in this critical industry. From EurasiaNet. by Gayane Abrahamyan 6 February 2009 Large-scale layoffs in Armenia are heightening social tensions. Some observers believe the trend could spur political protests as workers and business owners grow increasingly frustrated with the government’s economic course.

The mining industry has been hit particularly hard. Copper, gold, molybdenum, zinc, and lead are Armenian exports with the strongest ties to world markets, where prices have tanked in recent months.

So far during the global financial crisis, the overall number of Armenians who have lost jobs or been laid off is in the thousands, according to a government source who spoke on condition of anonymity. While some officials argue that the scope of the crisis is relatively small, Sona Harutiunian, head of the State Employment Agency, conceded that Armenia’s labor market is "so small that the [loss] of even several hundred jobs creates serious problems." The country has an "economically active" population of just under 1.2 million people, according to the National Statistical Service. Officially, Armenia’s official 2008 unemployment rate was 6.3 percent, but some non-governmental organizations estimate the actual rate was as high as 27 percent. No matter what the actual figure was last year, it is destined to grow significantly in 2009.

In Kapan, a town of 40,000 located near Armenia’s southern border with Azerbaijan, the biggest employer in town, the Deno Gold Mining Company, has been closed for three months. Sixty percent of the majority-Canadian-owned gold processing facility’s 1,526 employees have been laid off in that time.

The facility’s employees went on strike for a few days in early November, when the job cuts were first announced. Intervention by the ministers of energy and natural resources, labor and social issues, and economy ended the strike, with permanent job cuts postponed until 18 February. Until then, laid-off employees are collecting two-thirds of their salaries.

"Nobody can predict what will [happen] after 18 February. It depends on the economic situation in the world," said company director Robert Falletta. The company is one of the largest employers in the southern Syunik region.

In an effort to keep Deno operating, the government provided 800 million drams, or over $2.6 million, in bailout assistance in November. Neither the government nor the factory, however, has provided any additional details about further assistance plans.

Job cuts have also cost 450 people their jobs at the copper and molybdenum plant in the southern town of Agarak, some 400 kilometers from Yerevan. "Today, more than the half of the working population in Agarak is jobless and the government has to be seriously concerned about this," commented Arkadi Sargsian, trade union boss at the Agarak plant. Talks are ongoing with the government about financial assistance, he added.

A wave of job cuts has also hit Armenia’s industrial north; just under half of the Armenian Copper Program Company’s 1,044 employees in Alaverdi were laid off in November. The firm provided 70 percent of the town’s jobs, according to a local employment agency. Nearby in Gyumri, the country’s second largest city, two factories have been closed since December; in Vanadzor, large-scale layoffs have hit one chemical plant, while a welding factory has shut down entirely.

Without the Armenian Copper Program Company, Alaverdi Mayor Artur Nalbandian sees dim prospects for the future. "This problem depends neither on the state, nor on the company’s management. But I can say one thing: Alaverdi will not survive without the plant. We have neither the land for agriculture, nor the means," Nalbandian said.

Meanwhile, Yerevan itself is also feeling the economic pinch. In December, Armenia’s largest chemical plant, Nairit, which produces rubber, laid off more than half of its 2,744 employees for four months.

The situation has raised red flags about the likelihood of protests. While the government has not directly addressed that possibility, some observers and opposition politicians believe that protests are a given. "Protests are unavoidable," commented Bagrat Asatrian, a former chairman of the Central Bank of Armenia, who is sympathetic to ex-President Levon Ter-Petrosian. "People see that the state doesn’t take any steps, except delivering beautiful speeches, and making the tax burden heavier every day."

Failure to slash Armenia’s corporate tax rates only worsens the situation, added economist Andranik Tevanian, head of the Politeconomia think-tank in Yerevan. Supporters of Ter-Petrosian agree, saying that the government should use its foreign currency reserves to keep factories open.

"Countries across the world reduce the tax burden," Tevanian commented. "But it’s just the opposite with us. … Instead of providing large companies with money not to cut jobs, they have been giving promises alone for several months."

Companies with revenues over 58.5 million drams (about $191,000) must pay 30 to 35 percent of their revenues as taxes; those with less revenue pay 10 to 15 percent.

Despite the recent bevy of gloomy news, Economy Minister Nerces Yeritzyan is remaining upbeat. "We have overcome the first wave of the crisis," he told EurasiaNet. "We analyze world markets every day. I can’t say anything at the moment, but I am confident the situation will improve."

The prevailing mood in mining towns, however, underscores that many Armenians are deeply worried about the near future. In the southern region of Syunik, the official unemployment rate already stands at 15 percent. In reality, though, the figure is "twice as much and will grow drastically, if no serious measures are taken," said Ruben Petrosian, head of Kapan’s regional employment agency.

In Kapan, the manager of one home appliance store, where sales have fallen by half in the past three months, could only offer a grim prognosis: "No plant, no customers."