The United States voiced strong support on Friday for a controversial pension reform implemented by the Armenian government, RFE/RL’s Armenian service (Azatutyun.am) reported, with U.S. Ambassador John Heffern saying that it is vital for Armenia.
Speaking at a conference in Yerevan, Heffern echoed government arguments in favor of a measure that has sparked street protests by young workers now required to save a significant portion of their income for their future pensions. He said this will not only give hundreds of thousands of Armenians “safe and adequate pensions” but also reduce tax evasion and boost the country’s fledgling financial sector.
“We believe that the new pension system is prudently designed to protect the interests of future pensioners,” Heffern said. “It will provide Armenian workers with the opportunity to improve their financial security in retirement by diversifying their sources of income, including saving for retirement in a private — private — pension fund.”
“The reality is that the current system in Armenia is not sustainable. Change — though difficult — is necessary,” he added.
The diplomat acknowledged that many Armenians born after 1973 and therefore covered by the reform strongly oppose it because they do not want to see their net wages shrink by up to 10 percent and lack trust in two private pension funds chosen by the government to manage their extra social security contributions. But he argued that the funds are run by two European asset management companies with “long track records of success.”
One of them is a joint venture between Austria’s C-QUADRAT Investment and Germany’s Talanx Asset Management. The other, Amundi-ACBA, is a subsidiary of the French banks Credit Agricole and Societe Generale. Armenian officials expect the two asset managers to attract between $100 million and $150 million in pension contributions this year alone, RFE/RL reports.
“We must also recognize that many Armenians lost their long-promised pensions when the Soviet Union collapsed,” Heffern said, referring to a key reason for the workers’ fears. “That memory is still fresh. In addition, there is a lack of trust among the government, Armenia’s institutions and the citizenry.”
The Armenian government, continued Heffern, should therefore clearly explain the merits of the reform to the population “not just once or twice, but over and over.” “It now needs to provide more information on how the new system will ensure the safety, efficiency, and impartiality of pension contributions for all Armenians,” he said.
The government was supposed to do just that through the Pension System Awareness Center Foundation set up by the Ministry of Labor and Social Affairs and supported by the U.S. Agency for International Development (USAID) for the past several years. Friday’s conference, which featured speeches by Heffern and Prime Minister Tigran Sarkisian, was organized by that center.
The conference brought to light not only U.S. but also multilateral donor support for the reform. The Yerevan-based representatives of the World Bank and the International Monetary Fund unequivocally defended Armenia’s ongoing transition to the new pension system as they addressed the forum, RFE/RL reports.
Mark Horton, an IMF mission chief for Armenia, said earlier this month that the reform would “provide an impulse to financial sector development.”
ANCA voices disapproval
Speaking from Washington D.C., the Executive Director of the Armenian National Committee of America, Aram Hamparian, voiced his disappointment at the U.S. government’s support for the pension reform law.
“The US Congress, reflecting the will of the American people, rejected a relatively modest effort by President Bush to privatize a portion of our Social Security system,” Hamparian said in his comments.
“So, why then is our U.S. government — in the face of public protests and broad-based political opposition — so persistently pushing for a far more extreme model of pension privatization in Armenia?”
Protesters disrupt conference
Anti-government activists protesting outside briefly gatecrashed Friday’s conference, which was attended by senior Armenian officials, Western diplomats, and representatives of international lending institutions, private finance companies and commercial banks.
Members of the Dem.Am pressure group campaigning against the reform briefly disrupted the discussions, chanting slogans, holding placards, and demanding that they be allowed to address the audience, RFE/RL’s Armenian service reports.
A government official presiding over the conference refused to allow any of them to take the floor, however.
That did not stop one of the protesters, Davit Manukian, from appealing to foreign participants. “Please tell me in which democratic country a reform or law is enforced when 80 percent of the population is against that reform or law,” he said in English.
Manukian and other activists insisted that the Armenian authorities have failed to substantiate the need for additional social security contributions deducted from the monthly wages of some 270,000 workers born after 1973.
The protesters broke into the conference room after Prime Minister Tigran Sargsyan delivered a 30- minute speech and left it along with senior representatives of the donor community, according to RFE/RL. Sargsyan reiterated government arguments that the existing pension system is not sustainable because of Armenia’s aging population.
“They say ‘we don’t trust you, the country is in trouble, there is emigration and poverty,’” Sarkisian said of the reform opponents. “Yes, that is correct. But what is the way to rectify it? There is only one way: reforms. There is no other way out.”